Monday, 13 September 1999

The Czech Republic 1992 to 1999: From unintentional political birth to prolonged political crisis

I wrote this long, comprehensive text with the help of Jan Culik, Steven Saxonberg and Kazi Stastna for publication in Central Europe Review on 13 September 1999. It was quite an undertaking, covering a broad sweep of current history up to spring 1999, and I've been asked several times in the years since to update it. No thanks.

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The Czech Republic was born on 1 January 1993. To understand its development since then, this article presents a brief historical survey of the past six years, a time that was dominated by one man: Vaclav Klaus.

The Klaus era: "Communism in reverse"

Vaclav Klaus was Prime Minister from 1992 to 1997. Under his rule, especially in the early years, the atmosphere in Czechoslovakia/the Czech Republic could be characterised, with only a little exaggeration, as "Communism in reverse." Klaus presented himself to the Czechs and to the international public as a highly experienced economist with a reliable and competent plan how to privatise state property and how to quickly bring about economic prosperity in the Czech Republic.

Klaus saw himself as a right-wing politician, as a follower of Margaret Thatcher. He persuaded much of the Czech public and almost all of the Czech media that there was no alternative to his economic reform programme. Whoever tried to question this was an enemy--an unreconstructed Communist or a socialist "jeopardising the fragile Czechoslovak democracy and wanting a return to pre-89 days." For much of the time when Klaus was in office, most of the Czech media followed his line slavishly.

There was little unencumbered public debate. The Czech public was happy to have what they saw as a strong, competent and confident leader, who would solve all their problems for them and lead them into Paradise. (see also "The Czech Media: Fulfilling their role?")

This intolerant, post-Communist model started to crumble after the June 1996 general election, when Klaus's government failed to win an outright majority. Serious economic problems were apparent by 1997, and the whole Klausian programme became discredited by lawlessness, banking and financial scandals.

Before we look in detail at the Klaus-dominated early years of the Czech Republic, however, it will be useful to outline the final chapter of Czechoslovakia.The "Velvet Divorce"

Czechs and Slovaks experienced the Communist era differently, and as a result, they also disagreed on the types of transformation they expected in the post-Communist era. The Czech lands were already among the most industrially advanced in the entire world during the 1930s, while Slovakia was still basically an agricultural society.(1) During the Communist period, Czech trade was reoriented from the highly industrialised West to the less developed East, while investment was diverted from light to heavy industries. As a result, Czech industry stagnated and no longer belonged among the world elite.

In Slovakia, by contrast, the Communist regime succeeded in rapidly transforming the area from an agricultural to an industrialised society. So, while the Communist regime was seen by the Czechs as an anti-modern regime, the Slovaks perceived it as more of a modernising one.

This difference in perception was further solidified by the lower level of repression in Slovakia during the "Normalisation" period that followed the Warsaw Pact invasion in 1968.(2) The Normalising regime took a tougher stance toward Czech intellectuals and party members than it did against Slovaks, because Czechs were considered to have been the main supporters of radical reforms during the 1968 Prague Spring.

Since the two parts of the country had different economic starting points and different outlooks on the Communist era, it is not surprising that Klaus's economic reforms affected the two areas differently both in the economic and political spheres. Despite the more favourable development of Slovakia during the Communist period, Slovakia was still economically behind the Czech lands, as its rapid industrialisation under Communism was mainly based on investment in unmodern, heavy industry. Consequently, Czech industry was better able to compete when Czechoslovakia quickly opened its doors to international competition. Slovakia was further hit by its dependence on the import of energy and raw materials. During the Communist era, Slovakia was able to cheaply import these items from the Soviet Union at prices well below the world market level. Suddenly, Slovak industry had to pay much higher prices for these inputs.

Meanwhile, the Federal Czechoslovak government decided to halt all arms production after former dissidents, such as President Vaclav Havel began to call for a more moral type of government. This hurt Slovakia much more than the Czech lands, because about 24% of the Slovak machine and electrical industry was based on arms production, compared to 7% in the Czech lands.(3) To add insult to injury, one year after the split of Czechoslovakia, Czech Prime Minister Vaclav Klaus decided to allow Czech industry to produce arms again, and this time, Havel gave his full support.

As a result of these differences, Slovakia suffered much more from the post-revolutionary economic reforms than the Czech lands. While unemployment in the Czech lands in 1991 was only 4.1%, in Slovakia it had reached nearly 12%.(4)

Economics drove the political situations in the two republics along different paths. While Vaclav Klaus was consistently one of the most popular politicians in the Czech Republic, he was one of the least popular in Slovakia. Similarly, while former Prague Spring leader, Alexander Dubcek, was consistently among the most popular politicians in Slovakia, this symbol of "socialism with a human face" was among the least popular in the Czech Republic.

With the 1992 elections the two republics went in completely different directions. Czech voters gave a majority to liberal and conservative parties, while Slovak voters preferred nationalists, leftists and left-leaning nationalists. The leftist-populist Vladimir Meciar emerged as the winner of the Slovak elections, as his Movement for a Democratic Slovakia received over one third of the vote to the federal Parliament and 37.3% of the vote to the National Council in Slovakia.(5)

Although both Klaus and Meciar insisted before the elections that the two could reach a compromise with each other, they quickly decided after the elections to divide the country. Neither wanted to compromise on his version of economic reform or his version of the future constitutional make up of the country.

Of course, nationalist sentiments had been growing in Slovakia. Even the normally moderate and pro-federalist Slovak Christian Democrats began talking of having a separate Slovak "chair and star" in Europe.(6) But the main reason for the split was the inability of Klaus and Meciar to agree on economic and constitutional matters.

After some haggling over the conditions for a possible new type of federation or confederation, Klaus and Meciar agreed to call it quits. Klaus was a supporter of a stronger centralised government and less willing to compromise on the issue of greater Slovak autonomy than were the former Czech dissident leaders around Havel and former Czech Premier Petr Pithart.

The two leaders thus brought about the "Velvet Divorce," but they did so against the will of the population. The vast majority of both Czechs and Slovaks had originally opposed the dissolution of Czechoslovakia in survey after survey. For example, a poll taken in 1991 showed that only 9% of Czechs and 15% of Slovaks favoured the creation of separate, independent states.(7)

Still, on 1 January 1993, the Czech Republic and the Slovak Republics officially became new, independent countries.

1992 elections

The first post-Communist elections held in 1990 were really a referendum against the former regime. Most of the opposition groups joined the wide coalition making up Civic Forum, which gained the majority of seats in both the Czechoslovak federal and Czech national parliaments.(8)

By the time the next elections took place in May 1992, Civic Forum had split into several competing factions. Finance Minister Vaclav Klaus had founded the liberal-conservative Civic Democratic Party (ODS), while other right-wing intellectuals had formed the Civic Democratic Alliance (ODA). In the middle of the political spectrum, the majority of dissidents and ministers of the first government joined Civic Movement (OH), which profiled itself as a social-liberal party. Some of the former Civic Forum ministers, such as Valtr Komarek, deputy prime minister in charge of economic reforms, and Petr Miller (minister of labour and social affairs) joined the Social Democrats (CSSD).

Klaus and his ODS were the big winners of the post-Forum elections in 1992. In the vote for the Czech National Council, the body which would become the all-important Lower House of Parliament in the nascent Czech Republic, the ODS gained 29.7% of the votes, in a coalition with the Christian Democratic Party (KDS), with which it later merged. Somewhat surprisingly, the second biggest party was the Left Bloc, which was a coalition of the Communist Party and a reform Communist group. Together, they received 14.1%. Another coalition, going as the Liberal Social Union (LSU) received 6.5%, as did the CSSD. The main party of the LSU group, was the Socialist Party, which is one of the nation's oldest parties. It was founded in the 1890s and after participating in almost every government during the First Republic of the inter-war era, the party continued a formal existence in Parliament during the Communist era as one of the members of the National Front. Another old party dating back to the First Republic, the People's Party, together with the Christian Democratic Union (KDU-CSL) was close behind with 6.3% of the votes. The radical right-wing Republicans received 6%. ODA also received 6%. Finally, a regional Moravian party received 5.9%. The flagship of the former dissidents, the Civic Movement, narrowly failed to make it into Parliament.(9)

The Czech lands had voted very differently from Slovakia, however. While the centre-right gained the absolute majority in the Czech lands, leftist and authoritarian-populist groups gained the majority in Slovakia. The left-leaning authoritarian, nationalist leader of the Movement for a Democratic Slovakia, Vladimir Meciar, became prime minister of Slovakia. President Vaclav Havel asked Klaus to form the new Czechoslovak federal government, but negotiations between the two strong leaders, Klaus and Meciar reached a dead end. Neither wanted to compromise on the future of the economic reform or the future type of state federation that the country would have. Thus, against the protests of Havel and the unhappiness much of the population in both countries, the two men agreed to part ways and set up two separate countries.

Havel resigned in protest, and for about half a year, the country was without a President. After the Czechoslovak split had become irreversible, Havel reluctantly agreed to return to the Castle and become the new Republic's first President. But in the interim, under Klaus's strong influence, a Constitution for the newly independent Czech Republic had been hastily written which strongly weakened the role of the President.(10)

After the 1992 elections, Klaus formed a centre-right government for the Czech Republic, which included the ODS, ODA and KDU-CSL. This coalition held 105 of 200 seats, which was not a large majority, but big enough to rule comfortably during the entire four-year term. The major policies of this government will be discussed below.

Privatisation

Klaus's top priority after becoming prime minister was to quickly privatise the public sector. Speed was so important that he was lukewarm to moral arguments favouring restitution of state property to its former owners, on the grounds that this would slow down the privatisation process. Eventually, he bowed to the pressure of the other parties and agreed to allow restitution of all property that was nationalised by the Communist regime. Property that was nationalised by the Nazis or the democratic regime of 1945-48 was excluded. Thus, Jews, who lost their property to the Nazis had no right to get it back. One reason for this limitation is that Klaus and his advisors were worried that if the deadline were made earlier than 1948, millions of Sudeten Germans, who were expelled from the country after 1945 and now form strong lobby groups in neighbouring Bavaria, might also claim back their former property.

The main venue for privatisation was to be the voucher system. Every citizen had the right to purchase one book of vouchers (coupons) for 1,000 Czech crowns (less than an average week's pay at the time). They could in turn use these vouchers to purchase shares in an enterprise during a public auction. At first there was very little interest in this privatisation scheme, and it looked like it would be a flop. Then, Viktor Kozeny stepped into the picture.

Kozeny founded the firm Harvard Capital and Consulting, an investment fund provider which promised a 1,000% return to those who would sign their vouchers over to the firm. Such a promise, combined with the improper association with the famous university's name, should have made Czechs suspicious and wary to join the scheme. However, the opposite happened: there was a sudden, mad rush to buy the vouchers. Many other investment funds quickly appeared to cash in on this new trend. In the end, over 8 million Czechs purchased vouchers. The privatisation scheme was declared a success. The dirty dealings behind the investment funds would only become widely known later.(11)

Large state firms were privatised in two waves of public auctions. Afterwards, Klaus proudly announced that the transformation to a market economy was completed. At first, Western investors agreed, and they considered the Czech Republic the model transition country.

Called "the Czech miracle," the Czech economic reform appeared to be the most successful in the region. In 1996, unemployment was 3.5% compared to 12.1% in Hungary and 15.7% in Poland. Inflation was only 8.8% compared to 23.6% in Hungary and 19.9% in Poland. Economic growth was a healthy 4.1%, and the budget had only a 0.1% deficit.(12)

It turns out, though, that celebrations were premature. The serious flaws of Klaus's reform programme became more and more noticeable as time went on. Headlines of financial scandals and business skulduggery certainly contributed to the centre-right coalition's failure to regain a majority in the 1996 elections. And they clearly led to the fall of Vaclav Klaus in the pivotal year 1997.

Social policy under Klaus

Unlike the economy, on the issue of social policy, Klaus did not even enjoy a brief period of success. Despite widespread of mistrust of the state, opinion polls showed continued support for generous social policies. Therefore, Klaus moved slowly from the social democratic type of universalistic policies of the previous government to stricter, means-tested policies, in which only the worst off could receive state benefits.

For example, in 1995 the Klaus government passed a law making child allowances only to families means-tested.(13) Unemployment benefits were also reduced from a maximum of 90% to 60% of one's previous salary, while the maximum length of benefits declined from 12 to 6 months.(14)

Even though Klaus tried to make social policy more market-liberal, he was aware that overly radical free market policies would cost him popular support. Thus, he decided not to remove price controls from the housing, energy or health sectors. Healthcare, schools and university tuition remained free. In reforming the health insurance sector, he chose the German model over the American: Czechs are allowed to choose their own health insurance companies, but the companies must fulfil certain strict conditions. As in Germany, the state health insurance company completely dominates the market.

The Klaus government also had a conservative, Christian Democratic attitude toward family policy, which encouraged women to spend more time at home. Thus, almost all aid to nurseries ended, while the extended maternity leave was increased to three and a half years. Since mothers also receive a six-month maternity leave, a mother having two children could leave the workforce for as long as eight years.(15)

Officially, men also have the right to the extended leave, but as Mita Castle-Kanerova has written, the ministries responsible for maternity-leave legislation do not except any men to actually make use of this right.(16) A lump sum is paid for the extended leave, regardless of earned income. Since this sum has barely amounted to more than 20% of the average male's monthly salary, and since men earn more money than their wives in the vast majority of cases, hardly any men take parental leave. Tellingly, Czech statistical yearbooks use the term "extended maternity leave" rather than "extended parental leave" and do not give any statistics about the number of men on leave.(17)

In addition, abortions were no longer free under Klaus. The centre-right government introduced a fee that brought the level up to half of the average monthly wage.(18)

Foreign policy: Western integration

Almost immediately after the Velvet Revolution in 1989, the Czechoslovak government announced that it wanted to join the major Western organisations, especially the EU. An Association Agreement governing trade liberalisation with the EU went into effect in 1992 and, often called the "Europe Agreement," was further developed in 1995.(19) In 1993, the Copenhagen Agreements established requirements for Eastern enlargement, and, in 1995, the EU published the White Paper stipulating the requirements for integration into the single market. That same year, the Czech Republic became the first former Communist country to join the OECD.(20) Then, in January 1996, it formally applied for membership into the EU.(21) In July 1997, the European Commission recommended that negotiations begin with the Czech Republic on admission to the Union. Shortly afterwards, the EU worked out the Accession Partnership agreement.(22) Negotiations are presently underway for admission to the Union.

In December 1997, NATO invited the Czech Republic to become a member, and, in March 1999, the Czech Republic formally joined NATO.(23) (more below)

Economic reorientation

But the list of agreements and political associations with its West European partners tells only half of the story: the country not only shifted politically to the West, but also moved economically in the same direction.

After the collapse of the Communist regime, the Czech Republic had to quickly reorient its trade from the East to the West. In the 1980s, the highly industrialised market economies accounted for around 15% of Czechoslovak foreign trade, but, by 1995, they accounted for 60% of Czech exports.(24) The very role of exports changed in the Czech economy: exports in 1994 amounted to 52.4% of Czech GDP.(25)

During the Communist era, together with East Germany, Czechoslovakia had the most developed economy within the Eastern bloc. It was an important exporter of high-tech products, which were modern and competitive within the Communist bloc, but uncompetitive on the world market. These types of products could not be exported to the West. Today, with its economy highly dependent on Western exports, the Czech Republic has changed its trade patterns radically. The Czech Republic's trade relations with Western Europe resembles that of a moderately developed economy. As the researcher Ruzena Vintrova has noted, the country competes best "in branches at the middle level of sophistication, such as metallurgy and heavy chemicals, where selling costs are minimal and product development easily accessible. It cannot compete in those at the lowest levels, such as standard textiles and footwear, due to much lower wage and other costs in countries of East Asia. It cannot compete in more sophisticated branches, or in the most modern and fashionable products even for those generally less-sophisticated branches, as its productivity... is much lower... than in advanced economies."(26) Consumer goods make up only around 12% of all exports.(27)

Although the Czech Republic began the decade with a positive trade balance, by 1994, the surplus changed into a deficit and has remained negative since then.(28) While exports decreased from 1990 to 1995, imports increased.(29)

Since Czech industry has fallen so far behind western standards, the country has been in dire need of western investment, to modernise its enterprises. From 1990 to 1996, 7.1 billion US dollars have been invested in the country from outside sources. EU countries accounted for 69.1% of that total. Germany is the most important investor, accounting for 27% of all foreign direct investment. The other most important EU countries are the Netherlands (14.5%), France (7.8%), Austria (7.3%) and Belgium (3.9%).(30)

Regional co-operation

Although the February 1991 Final Declaration of the Visegrad Agreement between Czechoslovakia, Hungary and Poland hinted at the creation of a free trade area, it was not until December 1992 that a real free trade agreement appeared between these countries. The CEFTA (Central European Free Trade Area) Agreement envisioned the eventual elimination of trade restrictions and established graduated deadlines based on the "sensitivity" of the goods concerned. There were three classifications and three major deadlines spaced out over about eight years from the time of signing. For many goods, such as "non-sensitive" industrial products, free trade has already become a reality, but for others, especially agricultural products, strong protectionist measures still exist. It is hoped that by 2001, in synchronisation with the easing of trade restrictions between these countries and the EU, a full free trade area will be established in the Visegrad region.

The CEFTA Agreement was clearly EC inspired. It closely parallels the pattern set by the Interim (Europe) Agreements, signed a year earlier by these countries and the EC, in terms of deadlines and the categorisation of goods. The primary purpose of the CEFTA Agreement was to address the paradox created by the Europe Agreements. Specifically, with the reduction of trade barriers between each of these countries and the EC, the maintenance of trade restrictions between individual Visegrad countries was simply indefensible.(31)

It seems fair to suggest that the EC prodded the Visegrad countries into creating the CEFTA agreement not only to eliminate this paradox but also to delay Visegrad entry into the EC by establishing Central European regional integration as a hurdle. Superficially, the EC set these countries this task to give them a chance to prove that they can work together, and learn, in the patronising words of former French Minister for European Affairs Alain Lamassoure "la vie communautaire."(32)

Of course, for the EC this was a suspiciously useful delaying tactic, as the EC was in no way ready to accept these countries as members due to its own need for internal reform. Brussels faced a daunting reform agenda throughout much of the 1990s, and politically sensitive but necessary changes to voting rights in the Council of Ministers, agricultural subsidies and structural funds meant that Brussels was in no real hurry to integrate its Eastern neighbours.

But another reason for the delays to EU integration was to be found in Prague itself.

The myth of Czech exceptionalism

Klaus might have come across as being overly self-confident in announcing so quickly that the country had completed its transformation, but his foreign policy was openly arrogant. Rather than continue co-operation with the Central European countries through the Visegrad agreements, he shunned his neighbours, claiming that the Czech Republic belongs to the West, rather than Central Europe. Klaus reasoned that the Czech Republic was so far ahead of its neighbours, that its entrance into Western organisations, such as NATO and the EU could only be slowed down by associating with these "lesser" countries. Some analysts claim that Klaus hoped that Germany would support Czech entry before the rest of the pact, while others claim that he was counting on Great Britain. In either case, his policy was a failure.

German Chancellor Helmut Kohl did not appreciate Klaus's indifference on the issue of compensating Sudeten Germans who had to leave Czechoslovakia after World War Two. The Czech-German Declaration signed at the beginning of 1997 was an attempt to address some of the allegedly outstanding issues of the 1940s, but served to do little more than whip up anti-German sentiment in the Czech Republic. The new German government which came to power in 1998 did not feel bound--as Kohl's coalition had to some extent–-to make conciliatory gestures toward the Christian Social Union party, the self-declared champion of expelled Sudeten Germans in Bavaria. Thus, the Declaration was politically meaningless nearly as soon as it was signed, though its two-year-long negotiation and the Sudeten issue in general was a source of some tension between Kohl and Klaus personally due to some inopportune words exchanged in Budapest in 1993.(33)

Furthermore, Klaus's criticism of EU policy particularly irritated Europe-building Kohl. Klaus would begin meetings with his German colleagues by asking if they still were serious about introducing the single currency, clearly forgetting that this was one of Kohl's pet projects. Klaus also often travelled to the West and lectured the EU about its "socialist" policies and claimed that the West had a lot to learn from the Czech Republic. Such behaviour irritated Kohl to the point that he never invited Klaus to visit him in Germany.

Some analysts believe that Klaus hoped that Great Britain would push for early Czech entry into the EU. According to this argument, Margaret Thatcher and her replacement, John Major, both wanted to prevent the EU from moving toward greater harmonisation of monetary and social policies. Having another market liberal country in the Union would put a brake on such developments. What Klaus did not understand, was that no major Western country wanted to give the Czech Republic higher priority than larger and geopolitically more important Poland.

Both of the above arguments have in common is idea that Klaus misjudged the West. The West did not believe in Czech exceptionalism. Rather, the Western powers wanted the main Central European countries to join the Western organisations together. Klaus's neglect of the Visegrad agreements simply raised fears that the Czech Republic would not be a reliable country, which was willing to co-operate with other countries.(34)

The rise of the Social Democrats

During the first free elections in 1990, a group of social democrats tried to make a go of it on their own, outside of the broad Civic Forum coalition. The Social Democratic Party, however, failed to pass the 5% threshold to Parliament. One of the reasons was that it lacked known personalities. The party was led by a group of unknown expatriates, who ran the party in exile during the 1980s.(35) Its leader, Jiri Horak, had spent the last four decades in the USA.(36)

Although Horak was a rather colourless personality, his defeat of the former dissident Rudolf Battek for the party chairmanship paved the way for the party's future success. Battek was a staunch anti-Communist, who opposed the acceptance of former Communist Party members into the Social Democratic Party. Horak, by contrast, let in members of Obroda, a group of reform Communists of the Prague Spring era. Horak's willingness to forgive former Communists made it possible for famous ex-Communist Party members, such as Valtr Komarek and Milos Zeman to join the party.(37)

Former Economic Minister Valtr Komarek's entry into the party was a significant watershed. He had once been Klaus' chief and protector at the Prognostic Institute, but the two had a falling out over economic policy. Komarek favoured a more gradual transformation of the economy. He thought that the state should restructure the enterprises before selling them off, so that they could be sold for much higher prices. Other well-known MPs from Civic Forum also joined the party, including members of the club "Social Democratic Orientation," such as Jozef Wagner, Pavel Dostal and Ivan Fiser.

Once Komarek joined the Social Democrats, the party's popularity immediately surged to over 10%. But Komarek did poorly in the economic debates against Klaus, and although party leader Jiri Horak announced on election day in 1992 that the CSSD would receive 15% of the vote,(38) in the end, the CSSD only gained 6.5%.(39) After the elections, a bitter Komarek resigned from politics.

His loss did not hurt the party much, however, because the socially liberal Civic Movement had failed to enter Parliament, and several of its politicians moved over to the CSSD. This new membership wave included Pavel Rychetsky (former vice-minister in charge of constitutional reforms), Petr Miller (former minister of labour and social affairs) and Kvetoslava Korinkova (former minister of government oversight).

Shortly before the 1992 elections, a former participant of the Civic Movement faction in the federal Parliament decided to run on the Social Democratic list as an independent. His name was Milos Zeman.

At the February 1993 party convention, Zeman led a faction that wanted to take a confrontational stance against the Klaus government. Another group, led by Horak, wanted to co-operate with the government. Zeman's line won, and he defeated Horak's chosen candidate, Pavel Novak, in the battle for the party leadership.(40)

Horak announced that the party had moved "considerably to the Left." Zeman saw himself, though, as a pragmatic politician and claimed that he wanted to form a "realistic bloc" with the Liberal Social Union and the regional Moravian-Silesian Party HSD-SMS.(41)

Although Zeman's somewhat populist style earned the mistrust of much of the Czech middle class, he was a hard hitter, who was not afraid to stand up to Klaus. For the first time, Klaus had a tough opponent. In addition, during this period, several younger politicians emerged within the Social Democratic Party, such as Stanislav Gross and Petra Buzkova, charismatic individuals widely seen as young modernizers who could rejuvenate the party.

Now that the privatisation process appeared to be finished, the Social Democrats could successfully play on fears of much of the population that they would fall outside of the social safety net. As already noted, Klaus's weakness at the time was certain in the issue of social policy.

The Social Democrats also took advantage of the decline of other small parties. Civic Movement had become a small, insignificant organisation. The parties within the Liberal Social Union began arguing with each other and with themselves. The best known party, the Socialists, suffered from tremendous infighting. The Moravian parties also lost support. These small parties were slipping out of the picture, but their voters remained critical of the Klaus government. This formed a further base of support for the CSSD.

The Social Democratic Party was further helped by a change in strategy, much influenced by the sociologist Oto Novotny, who began to work as an advisor to the party in 1994. Novotny argued against simply criticising everything that the government did and claimed that the party had to become more selective in its criticism. He noted that the majority of citizens basically supported the transformation process and that votes could only be gained from the centre, not the left. The party had to take a critical stance in some questions but support the transformation in general and become more like a "classic," Western social democratic party.

According to the journalist Alexandr Mitrofanov, Zeman accepted Novotny's strategy to some extent and began putting more emphasis on his knowledge of economic and political issues and less emphasis on his aggressive rhetorical skills. However, Zeman was careful in changing strategy so as not to lose the radical voters.(42)

In 1995, the CSSD's popularity rose continually in the public opinion polls. At the beginning of the year, the ODS still led by 10%, but, by July, that advantage shrunk to 4-5%.(43) Zeman gained further legitimacy when Havel invited him and Buzkova over to the new presidential residence. A year later, Havel gave Zeman further help, by announcing before the elections that, in contrast to Klaus's and ODS Foreign Minister Zielenec's accusations, the Social Democrats do not want the country to return to the past.(44)

During the 1996 election campaign, Zeman toured the country in a specially designed bus, known as the "Zemak," and continually emphasised his closeness to the common man. He made efforts to label Klaus elitist and out-of-touch by painting "Have a good flight, Vaclav!" on top of the "Zemak" bus so that Vaclav Klaus would get a message as he campaigned throughout the republic in a helicopter. Zeman made hundreds of stops in the "Zemak" during his intensive campaign, and, in the end, his efforts paid off: the CSSD increased its vote totals four-fold over the 1992 election results.

The 1996 elections: the crisis begins

The centre-right coalition of ODS, ODA and KDU-CSL ruled smoothly until 1996. In the 1996 elections, however, the coalition failed by one seat to gain an absolute majority. The ODS received 68 seats; the ODA, 13 seats; the KDU-CSL, 18 seats: together only 99 of 200 seats. The Social Democrats under Zeman had scored a remarkable 61 seats, making them the second largest party in Parliament.(45) Since those four parties refused to talk to Republicans and Communists about future coalitions, no clear centre-right or centre-left coalition was immediately apparent from the election results.

After intense negotiation, Klaus finally struck a deal with Social Democratic Chairman Milos Zeman that allowed Zeman to become the chairman of Parliament, in return for agreeing not to vote against the installation of the Klaus government.

Although the coalition lost seats in Parliament, it actually increased its vote total by 2%. Votes that previously had been "wasted" on small parties that failed to enter Parliament, now went to parliamentary parties,(46) and the number of parties in Parliament declined. Both the Moravian Party the LSU left Parliament. The number of parties further decreased as the ODS had fully absorbed the Christian Democratic Party (KDS). Furthermore, the Left Bloc dissipated, leaving the Communists to fend for themselves. Thus, the 1996 elections left the number of parties in Parliament halved from 12 to 6 parties.(47)

Another important result of the 1996 election was the consolidation of the centre-left. The Civic Movement had barely missed the 5% barrier in the previous elections. By 1996 it had changed its name and become a minor party, without much chance of ever making it into Parliament. The LSU alliance also collapsed and fell out of Parliament. As had happened after the 1992 elections, many of these parties' voters switched over to the CSSD. Thus, the Social Democrats had almost quadrupled their total from about 7% in the 1992 election to 26.4% in 1996. There was now a strong centre-left opposition that was not overshadowed by the Communists.

With the decrease in the number of parties, the political spectrum came close to the traditional Western system with class-based voting and political contention centred around economic policy. The Social Democrats received most of their votes from blue-collar workers, while the market-liberal ODS and ODA were much more dependent on managers, the self-employed, technicians and those doing intellectual work.(48) Klara Vlachova, writing after the 1996 elections concluded: "The dominant axis of the Czech political system is the classical socio-economic dimension of left-right. This means that the main political conflicts in society are over the economy, the role of the state in the economy and social inequality, i.e. the conflict between redistribution and the market."(49)

Brief respite

In November 1996, the Czech Republic finally held its long-awaited elections to the Senate, the Upper House of Parliament promised in the 1993 Constitution. In a two-round, first-past-the-post system, the coalition parties took 52 of 81 seats. Although Senators play no direct part in the formation of a government, the victory of the coalition acted as a vote of public confidence in the minority government and strengthened the coalition's position. For a moment, it did seem to be, as one newspaper noted, "A New Chance for the Coalition."(50)

Another event that served to bolster the coalition government was the defections of two Social Democratic Members of Parliament. In December 1996, Jozef Wagner and Tomas Teplik, both MPs for the Czech Social Democratic Party, voted with the coalition on the matter of the state budget for the next year. Having broken ranks with the Social Democratic Party leadership on such a key issue, both were considered traitors and thrown out of that party.

Teplik joined the ODS in March 1997, giving the coalition 100 seats in the 200-seat Lower House. With independent Wagner willing to side with the government on occasion, it seemed that the minority coalition had become more or less a majority one by early 1997.(51) Not even the downfall of the charismatic ODA leader and Deputy Prime Minister Jan Kalvoda in a minor scandal in December 1996 could seem to tarnish the coalition's positive outlook for 1997.

But despite the temporary reprieve of its Senate success and its numerical fortification in the Lower House, the coalition was actually facing its year of doom: 1997.

The plundered economy

Cracks in the Czech economy became painfully evident to the wider public in 1996 and 1997. In 1996, no less than eight banks failed due to incompetence or outright fraud, making a total of 12 since 1994, amounting to billions of US dollars lost--equivalent to one month's pay for every citizen of the young Republic.

In one notable case in 1996, that of Kreditni banka, 450 million US dollars disappeared due to either improper lending or corruption. This led to weaknesses in the country's fifth largest bank, Agrobanka, which began to collapse in September 1996, threatening 2.5 billion US dollars in assets. The Czech National Bank, the central bank of the Czech Republic, moved to prop up Agrobanka with a rescue plan that went far beyond its normal guarantee remit. The largest four banks, all majority owned by the state, were asked to provide backing for the troubled Agrobanka. Directors of a firm called Motoinvest, minority backers of both Kreditni and Agrobanka were later arrested for embezzlement, but Kreditni's largest shareholder, the insurance giant Ceska pojistovna, failed to notice the problems at Kreditni until an international accounting firm conducted an audit. At that point, the insurer, partially owned by the state and the four largest banks, was already out of pocket 250 million dollars.(52)

This embarrassment was a major blow for the Czech financial community and a stain on the international reputation of "the Czech economic miracle." But domestically, the fallout was perhaps even greater: television pictures of angry crowds outside banks did nothing to boost the confidence of the average citizen or support for the free-market economy.

Investment funds, the unexpected engines of privatisation, were also starting to go bust and some fund directors fled the country amid financial scandal. Harvard Harvard Capital and Consulting, led by the Bahamas-based Czech-turned-Irish citizen Viktor Kozeny, squandered at least 30 million US dollars in dubious "expenses," and there have been allegations that Harvard paid for inside information about certain privatisations some years before.

Other investment funds were soon to follow. In March 1997, over 75,000 shareholders lost investments totalling 79 million US dollars in two investment funds alone: Trend and CS Fondy.(53) Similar stories were to follow, and by April 1997, it was estimated that 750,000 Czechs, 7% of the population, had lost their investments in shadowy investment firms governed by inadequate legislation.(54) In the new Czech parlance, more and more firms were being "tunnelled out."

"Tunnelling out" was a process by which one company gained control of another and stripped the enterprise of all its assets. The uninformed small shareholders were caught by surprise and ended up with worthless shares. This also happened with investment funds that were raided by other unknown owners.

The weaknesses of Klaus's earlier reforms, driven by an oversimplified market-liberal ideology, had become painfully obvious. Legislation on such matters as bankruptcy or financial market regulation had been largely ignored. Without a watchdog body such as the American Securities and Exchange Commission, the vast majority of Czech shares were traded without any transparency whatsoever. This made it impossible for shareholders to know who the real owners of enterprises were. The Prague stock exchange was beginning to get the reputation abroad of being "just a vehicle for select insiders to enrich themselves at the expense of the ordinary shareholder."(55)

Western analyses would point to the Czech Republic's "sloppy" mass privatisation scheme (56) and especially the coupon privatisation plan which, though it did make millions of Czechs instant shareholders, failed to bring in the investment that normal share issues do. Each citizen only paid a nominal, administrative fee for the initial coupon books which were later exchanged for more valuable shares.

The other problem was that much of the privatisation was illusory. The state maintained majority or controlling share in the country's largest banks, and those banks, through their hastily set-up investment funds which concentrated citizens' coupon power, owned much of the economy, including the industrial giants. Klaus seemed to have remembered Lenin's dictum about banks being the "commanding heights" of the economy; he was reluctant to let these institutions go and risk their coming under the control of foreign financiers.

The state was most likely channelling money to these firms through the banks and the investment funds, but no one can be sure how much. Cushioned by this soft money, management would have had no pressing reason to undertake the politically delicate reforms of their firms. The logic of Communist management thus remained to some extent: why trim unnecessary staff when you can get money for them from the state?

The absence of proper, post-Communist restructuring was evidenced by the utter lack of necessary bankruptcies in the Czech Republic, especially in comparison with its transforming neighbours, such as Hungary, where over 30,000 weak companies were killed off by 1997. The dearth of restructuring kept unemployment figures artificially low and damaged the competitiveness of Czech firms.(57)

Spring 1997: The crisis deepens

The trade deficit reached a whopping six billion US dollars and as the state budget dipped into the red for the first time in three years. Governor of the Czech National Bank Josef Tosovsky was quick to point to rapid wage increases draining the state coffers and pushing inflation upward. He warned of the possible flight of foreign investors.(58) Klaus blamed Tosovsky's tight monetary policy which he said was overly concerned with inflation to the detriment of other important factors.(59)

But with the economic indicators looking bleak and the political pressure on, Klaus could not afford to keep his head in the sand: on 16 April 1997, he produced a new mini-budget to deal with some of these problems.(60) But it seemed to be too little, too late.

The "small package of (economic) measures" was a call for a "tightening of belts": these phrases become infamous, especially as many Czechs felt that, since 1990, they had been tightening their belts under Klaus's economic policies quite enough. But the problem was that the economy had been mismanaged, and though the country was receiving praise from Western experts at the European Bank for Reconstruction and Development as late as spring 1996,(61) by spring 1997, it was clear to all that "the Czech economic miracle" had finally come to an end.

The austerity measures called for cutbacks in state spending of about 5%, including sharp cuts in public-sector wages. A system of import deposits was created to slow the rapidly growing foreign trade deficit (though these were eliminated on 20 August 1997 after complaints from the EU). There were also promises to improve transparency in financial markets to boost investor confidence.(62)

Klaus's April 1997 mini-budget and its austerity measures were an open admission that mistakes had been made with the economy--precisely the area where Klaus was supposedly such an expert. The Czech Social Democratic Party, which had been pointing out some of these problems even before the 1996 general elections, seized the political opportunity successfully. Public satisfaction with the ruling coalition dropped ten percentage points in one month to only 24% at the end of April, and Klaus took a hammering in the opinion polls: his ODS was now polling only 18% against the Social Democrats' 25%.(63)

In the second half of April and throughout May 1997, talk centred on a possible--perhaps inevitable--devaluation of the Czech crown against Western currencies. The weakening of the crown was evident immediately after Klaus announced his coalition's austerity measures: despite promises from the Czech National Bank that no devaluation was in the cards, confidence in the crown collapsed, and it hit a 14-month low against the dollar and the mark.(64) At the end of April, the crown hit its "historic minimum," as investors nervously rushed to shed their crowns.(65)

The Czech National Bank abruptly raised its prime lending rate to discourage speculators and threw as much as 200 million US dollars at the currency by mid-May in a desperate bid to prop up the crown. On 22 May, the central bank's supported the crown with another several million US dollars, and the Czech National bank spent about three billion dollars in this period on currency defence alone. But everyone could see that a major devaluation was coming.(66) The panic on the currency markets spread, and the Prague stock market suffered a steep drop on 21 May 1997.(67) Panic also swept the general public: people rushed to exchange their crowns for more reliable foreign currencies at such a pace, that exchange counters were running out of foreign notes.(68)

Finally, on 26 May 1997, just four days after President Havel had met with coalition leaders and assured everyone that the country faced no economic crisis,(69) the levee broke: the Czech National Bank surrendered to unending pressure, eliminated the 15% fluctuation band in which the crown had been anchored since 1996 and allowed the Czech crown to float freely on the currency market. The crown immediately lost 10% of its value the next day.(70) Of course, this devaluation would help limit the country's growing trade deficit, but it spelled problems for future economic growth. A wave of foreign press criticism called on Klaus to do something to reinstall confidence in the Czech economy.(71)

May 1997 saw several calls for Klaus's resignation. These came not only from the opposition Social Democrats but also from members of his own cabinet, such as Trade and Industry Minister Vladimir Dlouhy (ODA), who suggested that the whole government ought to resign.(72) Leader of the Christian Democrats, Josef Lux, playing a bit of a double game in cosying up to the Social Democrats as a potential, future coalition partner, thought that Klaus's resignation would be enough.(73) On 20 May, under the gun of a threatened Social Democrat-led recall of some ministers in Parliament, the government agreed to a cabinet reshuffle.(74)

Despite the growing feeling that Klaus, first and foremost, should resign,(75) the heads which were to roll at this point did not include his. On the chopping block, instead, were Finance Minister Ivan Kocarnik (ODS), Interior Minister Jan Ruml (ODS) and Trade and Industry Minister Vladimir Dlouhy (ODA). Kocarnik was replaced by Education Minister Ivan Pilip, and Prague's ambassador to London, Karel Kuenhl, replaced Dlouhy. President Havel criticised Klaus's reshuffle, calling it merely "half-baked, cosmetic changes."(76)

But with the government's shaken position, the coalition was unable to convince Jan Ruml's hand-picked successor to accept the interior minister's job. President Havel had to refuse Ruml's resignation, and thus, Ruml remained at the head of the Interior Ministry for a few more months.(77)

The reshuffled government set about writing a formal government declaration to make clear their aims. These included a public-sector wage freeze, a reduction of public-sector imports and budget cuts.(78) Havel eventually resigned himself to the changes and approved the four new ministers. The President was evidently impressed by the normally arrogant Klaus humbly admitting past mistakes on national television and by the government's intention to put itself and its new emergency stabilisation plan to a confidence vote in Parliament.(79)

The confidence test was won by a single vote (that of ex-Social Democrat Josef Wagner) on 10 June. The 12 June announcement by US President Bill Clinton that the Czech Republic would definitely be included in NATO's first wave of expansion (80) did little to improve the public mood: the country was clearly headed for prolonged recession. Klaus's political troubles had only just begun.

Rivalries within the ODS

Apparently having used some ministers as scapegoats for the government's problems at the end of May, Klaus only increased the internal party tension that had been rising against him for some time. Some leaders in the ODS had been quietly critical of Klaus since June 1996, blaming the arrogant chairman for the ODS's failure to bring the majority coalition to outright victory in the 1996 general elections.(81) Many in the party felt that it was time for Klaus to go, and the spring crisis seemed to them to be the perfect opportunity to topple Klaus and renew the ODS from within. That renewal would be preparation for early general elections which would re-secure the right-wing coalition's majority government. The party rebels, knowing that the public was thinking along the lines of the old Czech proverb "a fish stinks from the head down," sought to get rid of Klaus as soon as possible.

On 3 June, Deputy Chairman of the ODS and Foreign Minister Josef Zieleniec went public with serious allegations against Klaus. Following Christian Democratic Chairman and coalition leader Josef Lux in his recent criticism of Klaus, Zieleniec expressed disappointment and a touch of disciplined outrage, because Klaus had supposedly not shown the government a critical letter from Stanley Fisher, the deputy managing director of the International Monetary Fund. Fisher's 29 March letter warned of impending problems in the Czech Republic's economic and currency situation. Zieleniec and other cabinet ministers said they would have responded sooner to the recent economic crisis had they known of the IMF's warnings.(82)

That event began to make public what had been simmering under the surface for many months: Klaus had a rebellious wing in his own party. That rebellion would split the party within six months.

An unexpected crisis

To compound the economic woes of the Republic, the summer of 1997 brought a natural disaster: devastating floods ravaged all of Central Europe and were particularly destructive in Moravia, the Eastern part of the Czech Republic.

In a month of unusually heavy rains, the devastation was severe. 47 people lost their lives. Another 40,000 had to be evacuated or rescued by the Czech army--many pulled out of flooded areas by helicopter. States of emergency were declared across Moravia, even in the large industrial city of Ostrava.(83)

Environment Minister Jiri Skalicky, the official charged with addressing flood damage, estimated the total damage to be 60 billion Czech crowns (1.76 billion US dollars). Other estimates were as high as three billion US dollars. Damage to industry alone was thought to be as high as 35 billion crowns, and many small businesses were forced into bankruptcy. 2,500 homes were destroyed and 15,000 damaged. Dangerous chemicals had leaked into the environment from flooded storage areas, sewerage systems had overflowed, thousands of animals were drowned and water sources were contaminated. Rivers had changed course, and massive landslides changed the face of the area permanently. Some settlements disappeared altogether. Only about a tenth of all damaged property was insured.(84)

Thus it fell to the government to do something. On 16 July, the Klaus government decided to give 150,000 crowns ($4,400) to every family that had lost its home. Those families also became eligible for low-interest loans of up to 850,000 crowns. On 13 August, the government approved another 3.5 billion crowns (103 US dollars) for rebuilding local infrastructure, assisting local firms and promoting housing construction in the wake of the floods.(85)

On 1 August, the government began issuing "flood bonds," a bond issue designed to raise money for dealing with the disaster, 5 billion crowns to be raised this way. The public showed a very strong interest in the bonds, purchasing them as fast as they were printed, but damage estimates were at least 12 times the bond issue's value. A government attempt to raise taxes to cope with the strain on the state coffers was foiled in September by individuals within the ruling coalition itself.(86)

Allegations emerged that the government was not doing enough in the crisis. Specifically, some claimed that international help was not sought early enough. Environment Minister Skalicky, quite naturally, denied this, though his words made it seem as if the Czech Republic were too proud to beg: "As a decent, civilised country, we had to wait until the EU itself showed an interest in finding out about the situation in the Czech Republic."(87)

Even the junior coalition parties, the Christian Democrats (KDU-CSL) and the Civic Democratic Alliance (ODA), demanded to know the cause of the delay in seeking foreign help and reasons why, in some cases, offers of help were refused. Skalicky, a member of ODA, blamed the Foreign Ministry, under the control of Zieleniec (ODS).(88)

Beyond the bickering of Prague politics, however, a real feeling of national community spirit developed that summer. The floods actually had a good side: the country had never been so unified, and one would have to go back to Czechoslovakia's Velvet Revolution to witness the kind of local and national "pulling together" inspired by the 1997 floods. Many sought to help flood victims in whatever way possible. Czech citizens and firms momentarily ignored the grim economic outlook and donated millions of dollars to disaster relief. Many others donated their time and even risked their lives to assist those in distress.(89)

But like the euphoria of the Velvet Revolution, the community spirit engendered by the summer floods quickly dissipated: what was left behind, smacked of selfishness, petty corruption and government inaction. One year after the floods, in the summer of 1998, much of the damage was still waiting to be repaired. Large portions of the money promised by the government and Parliament in August 1997 had not yet reached the local administrations. Roads and bridges, thus, still awaited reconstruction and replacement. Local leaders complained that too much of the money donated by private citizens in good faith had been squandered on computers and office supplies for the organisations supposedly there to help flood victims. Most disturbingly, designs for emergency systems that would deal with any such future disasters more rapidly and effectively, especially improvements to communication between various rescue organisations, remained on the drawing board.(90)

And, of course, the floods deepened the economic crisis. The crown continued its fall, the state's budget deficit was expected to be half a billion US dollars and foreign debt had reached the 20 billion US dollar level. The Czech National Bank openly admitted that foreign investors had reason to doubt the country's economic health.(91)

Romani "exodus"

The outside image of the Czech Republic was helped little by the growing number of Czech Roma leaving the country and seeking asylum in the West. What was initially a steady trickle of emigrants multiplied after 5 August 1997, when Nova Television ran a story about Czech Roma in Canada on a popular current-events programme. The programme showed Czech Roma living relatively comfortably in their newly adopted country. Within days, hundreds of Czech Roma applied for refugee status in Canada, and Romani leaders predicted that the number could jump into the thousands.(92)

Of course, Roma had been leaving the Czech Republic, both for economic reasons and for the chance to live a life more free of fear since the country's founding. While national unemployment was around 4%, it was 70% for Roma, according to a government report, suggesting rampant discrimination in the workplace.(93) Violent attacks on Roma have been frighteningly common. This new wave of hopeful emigrants just brought the emigration story to international attention. (see side text "Blood and Land, Us and Them")

After over 1000 Czech Roma had applied for refugee status in Canada between the beginning of August and mid-September,(94) the whole affair began to repeat itself with Britain as the goal in October 1997.

Most Czech newspapers focused on the international embarrassment "they" (the Roma) and their "hysteria" were causing "us" (the Czechs).(95) This was especially true after Canada re-established visa requirements for visiting Czech citizens on 8 October.(96) Only a few writers dared to ask why the Roma were leaving in the first place.(97) More than the fear of racism, was the fear that if Britain were to follow the Canadians and raise a visa barrier to Czech citizens, EU entry would be complicated immeasurably. This threatened several times and happened to Slovakia a year later, but even with hundreds of Roma in the English port of Dover, the British government seemed unwilling to confound Prague's EU bid with renewed visa requirements.(98)

The issue was, however, not handled very well by the British media either; the British tabloids spoke of "the flood" or even "the horde" of Roma "invading" Britain in tones of ethnic fear usually reserved for the Central and East European press. Noteworthy as this issue was, twenty or thirty people a day hardly represented an invading horde.

At least Britain had the broadsheets, which allowed for some debate on the issue. In the British newspaper The Independent on 23 October 1997, for example, an immigration solicitor wrote that, in her experience, many Roma could genuinely be classified as refugees because they were fleeing persecution in Eastern Europe.

She quoted a critical passage from the UN High Commissioner for Refugees Handbook on Procedures and Criteria for Determining Refugee Status that states who can justifiably be labelled a refugee. Refugee status can be claimed on the basis of persecution, which may be defined by the following:

Where serious discriminatory or other offensive acts are committed by the local populace, they can be considered as persecution if they are knowingly tolerated by the authorities or if the authorities refuse, or prove unable, to offer effective protection.(99)

If the Roma were thus persecuted in their homeland, they could then be classed as refugees when they requested assistance abroad.

When these asylum cases are heard in Britain, lawyers defending the Czech Roma have to show examples of "discriminatory or other offensive acts" against Roma in the Czech Republic. Given at least 15 Roma murdered in racially-motivated attacks (some put the figure as high as 29 since 1989),(100) hundreds of other violent attacks, wide-spread educational discrimination and employment discrimination, making this point would not seem to be very difficult. But the defence must also show that the authorities tolerated such actions or refused or were unable to prevent these acts.

Eventually, such a case was made: Czech Romani emigrants won asylum in Britain in January 1998 and in Canada in April 1998. At least in certain cases, Western courts were agreeing with Czech Roma asylum seekers that racism in the Czech Republic amounted to persecution.(101)

Official reaction to the "Romani exodus" was as mixed as it could possibly be. In a Prague newspaper Senator and Mayor of the Prague 4 district Zdenek Klausner (ODS) said that Roma residing in Prague 4 could be relocated outside Prague.(102) Liana Janackova (ODS), a district mayor of Marianske Hory, a suburb of the North Moravian city of Ostrava, proposed that the city contribute to the cost of airline tickets for Roma wishing to emigrate to Canada. Application forms for financial assistance were even printed up and distributed. According to Janackova, "This (was) not a racist act. We want to help the Roma. (After the Roma leave) we will level all the buildings where the Roma now live and use the land for new construction."(103)

Although he did not demand their resignations, Prime Minister and ODS Chairman Vaclav Klaus openly condemned the "racially motivated statements" of his fellow party members.(104)

Generally, Klaus adopted a more rational line than some of the hotter heads in his party. Meeting with Romani leaders in mid-August, he acknowledged that Roma were under-represented in state bodies and promised a new governmental commission to examine such issues.(105) Klaus also supported the move to rescind the 1958 law which forcibly ended the nomadic Romani lifestyle.(106) In late October, Klaus stated that the government's position was that the Roma were a "natural part of (Czech) society" and asked them to remain in the Czech Republic. This move was openly supported by President Vaclav Havel who asked citizens to fight the "latent racism" in society.(107)

Unfortunately, xenophobia flared up again in its worst possible form on 8 November 1997, when Skinheads brutally murdered a Sudanese exchange student in Prague. President Havel, undergoing treatment for chronic bronchitis and pneumonia, sent word from his hospital bed that he felt the government was not doing enough to combat racism. Two days after the murder, several thousand people, including some government officials and members of Parliament, took to the streets in the capital to express their outrage at the senseless taking of life. Other protests took place in Hradec Kralove in East Bohemia and in Brno, the country's second largest city.(108)

Still, these protests were tiny compared with the 60,000 that marched on Prague on 8 November to protest the government's austerity measures. That demonstration, the largest since 1989,(109) signalled the economic dilemma was about to develop into a political upheaval.

ODS rebellion heats up

The cracks in the ODS had became completely apparent at the summer's end. The turning point occurred when ODS Deputy Chairman Miroslav Macek went public with his fifteen-page critique of the ODS, entitled "A Crisis of confidence."

Many leaders in the ODS, even some who hoped to see the back of Klaus, immediately chastised Macek for revealing the report to the media. They preferred an internal discussion which would not damage the party's attempts to get the minority coalition's 1998 budget through Parliament. This distaste for Macek's method prevented wider discussion of the issues involved.

In his critique, Macek blamed the current crisis in the party on an "obsession with success" which caused it to ignore actual problems. He said that the economic transformation was incomplete and that half-finished privatisation, especially in the financial sector, had left a kind of "bank socialism." Macek was careful to emphasise the non-economic aspects of transition, as well, claiming that the daily life of the common man was often ignored by the party.(110)

Most of Macek's critique was nothing new. ODS leaders had been calling for privatisation of the banks for years, for example. But because these tasks remained undone, Macek's underlying argument, intentional or not, was clear: the leader was not following through on the party programme.(111)

September 1997 also marked the end for Interior Minister Jan Ruml, who announced his resignation from his post for a second time that year. Since May, Ruml had been claiming to have grown tired of running the Interior Ministry, where he worked for five years.(112) Of course, everyone speculated that Ruml was growing even more tired of working under Vaclav Klaus. Events would prove that speculation correct.

At about the same time, Foreign Minister and an ODS Deputy Chairman Josef Zieleniec gave up his Parliamentary seat, ostensibly to devote more time to diplomatic affairs.(113) A founding member of ODS, Zieleniec used his additional free time to step up his criticism of Klaus.

Already in August 1996, Zieleniec was stressing the need for a multiplicity of opinions within ODS. He continued this line of criticism in June 1997, when he called for more dynamism and creativity in the right's leading political party. In September 1997, he supported Macek's critique of the ODS's problems, and in early October, Zieleniec lashed out at the inner leadership of the ODS, saying it had lost its ability to lead the party, the coalition and society in general.(114)

Still, this was all only a precursor to the real drama of late October, when the widely popular Zieleniec made his big move: on 23 October 1997, Zieleniec unexpectedly resigned his posts as foreign minister and deputy party chairman. Although his state position was hastily filled by non-party diplomat Jaroslav Sedivy before day's end, Zieleniec's resignation sent a shockwave throughout the Republic.

In his resignation speech, Zieleniec claimed to have been left out of important party decisions and no longer felt he could take responsibility for matters he could not influence. He was particularly unhappy with the way Jindrich Vodicka was chosen as Ruml's successor at the Interior Ministry without a wider party debate on the matter. And, with words that would resonate to the core of the party in just four short weeks, he said he was not satisfied with the management of the party's internal finances.(115)

With the news of the foreign minister's resignation, the crown took a serious hit on the currency markets, and the Prague stock market dropped considerably.(116) Formal membership talks with NATO, which had begun exactly one month earlier, were not affected, however.

Smelling blood as the ODS ripped itself apart, at the end of October, both of the ODS's coalition partners demanded a new government programme and a new vote of confidence in Parliament. The Christian Democrat leader Josef Lux and the Civic Democratic Alliance (ODA) leader Michal Zantovsky sharply criticised Klaus, but Klaus declared he was staying put.(117) In fact, it was Zantovsky who would blink first: he announced his resignation as ODA leader on 14 November, citing his inability to hold the coalition's smallest party together.(118)

Klaus's fall

In November 1997, Vaclav Klaus had been in power longer than any other government leader in the transforming countries of Central Europe. In fact, in the almost five years of its existence, the Czech Republic had never known another prime minister. 1997 had certainly been Klaus's most trying year, and there had been talk of the government's collapse since spring. But with the autumn crises, especially Zieleniec's resignation, it was clear to everyone in November that Klaus's days were numbered.

The reasons for the fall of the Klaus government are still hotly debated in Czech political circles, especially on the Czech right. For Klaus and his loyalists, what happened at the end of November was a directed attack on his leadership of the party by cowardly rebels who acted while the Chairman was abroad in Bosnia. The rebels simply invented the alleged problems in party financing. With language full of potency in Central Europe, Klaus's supporters blast the splinter group for its "Sarajevo assassination" of the man who invented the political right in the Czech Republic.

For the rebels, such talk is simply ridiculous exaggeration. They say Klaus had been making serious mistakes, and his refusal to recognise them destroyed the ODS in the end. Klaus was responsible for the right's failure to win the 1996 general elections, the faulty privatisations, the economic crisis that developed in 1997 and the country's worsening image abroad. Klaus's refusal to step down gracefully and allow the party to evolve, the rebels might say, forced their hand on the issue of corruption in the party's finances.

The truth lies somewhere between these two extremes. A party financing scandal had been simmering for quite a long time by November 1997. Allegations of corrupt party fund-raising centred around one 7.5-million-Czech-crown donation in particular, which was supposedly given to the party in 1995 by two gentlemen: Lajos Bacs of Hungary and Radziv M Sinha of Mauritius. The problem was, it later came to light, Mr Bacs had been dead for years before the date of his supposed donation letter, and Mr Sinha flatly denied ever having made such a contribution. A former professional tennis player and now entrepreneur, Milan Srejber, was then identified as the source of the significant donation to the party, but no one knew who had forged the donation letters of Bacs and Sinha in the ODS files.

A special meeting of the ODS financial committee on Wednesday, 26 November, lasted long into the night but was unable to clarify why the error had occurred. Harsh words were exchanged at that meeting, as many accused the leadership of not keeping its house in order. There was talk of returning the suspect money, which led to one of the more memorable quotes of 1997 from Tomas Ratiborsky, the party's chief manager, who said that it would only be appropriate to return the money to the donor if ODS did not know who the donor was (sic).(119)

Further allegations kept pouring in. There were rumours of foreign donations to the party and accusations that donations to ODS had influenced political decisions surrounding the privatisation of certain enterprises. Klaus denied knowledge of these things, if they were true at all. Zieleniec remarked that he had told Klaus personally about these and other party financing irregularities even before the 1996 election.(120) The hunt for the party's alleged foreign bank account would occupy police, independent analysts and party investigators for months to come.

Though much of the new material suddenly coming to light was as yet unsubstantiated and though some of it was obviously being released to weaken Klaus politically, the disarray and apparent corruption in the leading coalition party sent a shockwave through the financial markets. The Czech crown hit its lowest level since it was allowed to float six months before.(121)

On Thursday, 27 November, Klaus met with the ODS gremium, the party's inner circle, to deal with the growing scandal, and they decided to offer their seats at the party's next conference. Klaus was asking his party for a confidence vote.(122)

Deputy Prime Minister and Christian Democrat leader Josef Lux weighed in, saying that if Klaus had known about the suspect donation before the last elections, he ought to resign. Finance Minister Ivan Pilip agreed and considered his own resignation.(123)

On Friday, 28 November, the government fell apart: after an extraordinary, national conference of his party, Lux announced that his Christian Democrats were pulling out of the coalition. The public had lost confidence in the government, he said. The trade unions joined the demand for Klaus's resignation, as the bottom fell out of the bond market.

Then, Pilip and Ruml openly called for Klaus to step down. Miroslav Macek, who had obliquely done the same in September, now accused Pilip and Ruml of an "internal party putsch."(124)

Klaus returned early from his official visit to Bosnia to find his political future in serious doubt. On Saturday, a Nova Television reportage alleged that Klaus had bought a luxury villa in Davos, Switzerland, and the President himself had joined in the calls for Klaus to resign.

Hundreds of people gathered outside ODS headquarters on Saturday night and on Wenceslas Square on Sunday to express their support for the troubled Klaus. Prague Mayor Jan Koukal helped to organise the second of these demonstrations, which raised the anger of Havel, who called for Koukal's resignation. This, in turn, upset some ODS Senators, who reconsidered their support for Havel's presidential re-nomination.

In the early hours of Sunday morning, following an eleven-hour meeting of the ODS executive committee and after news-agency reports claiming he wouldn't budge, Klaus finally resigned as Prime Minister, thus causing the immediate resignation of the entire government.

Minister would stay on until a successor government was named, and President Havel asked Josef Lux to organise negotiations regarding the successor government. Klaus made it clear he would not take part in those negotiations, though others in his party, notably Ruml and Pilip thought otherwise.(125)

Interestingly, throughout this tumultuous period of Czech politics, the Parliament functioned rather smoothly. In a month when unexplained packages were exploding outside politicians' houses and party offices,(126) official business carried on as normal. Vaclav Havel was re-nominated for President, and the fallen government's 1998 budget was approved on 12 December with barely a hitch--again thanks to Mr Wagner.(127)

On 9 December, President Havel gave a speech to a joint session of Parliament in Prague's Rudolfinium building, site of the First Czechoslovak Parliament. He delivered a fierce, only partially coded, attack on Klaus, his governments, his style of politics and the state of the country after his reign. He criticised the excessive pride and arrogance of the recently fallen regime. Havel blasted the idea of "a market without adjectives" and compared it to Marxism. The economy had been tunnelled out, he said, and the country's leaders had made it seem that lying and stealing were the only ways to succeed.(128)

Havel's Rudolfinium speech shocked Klaus, who clearly thought that the President had overstepped his constitutional limits. Klaus claimed it was the re-emerging "tip of the 'Third Way' iceberg" that had long been rejected.(129) (for more on the ongoing debate, see "Three Vaclavs" in CER 10)

The world press seemed to agree with Havel, however.(130) The Economist, for example, was quick to point out possible positive aspects of Klaus's fall: perhaps the Czech Republic would finally confront its "appalling corruption."(131) According to The Times, Klaus's ouster was a change for the better, as Klaus had been "too slow to see that markets need rules."(132) But those who were happy to see the back of Vaclav Klaus had spoken too soon.

The regions save Klaus

Much of the party elite in the central ODS organs was aligned against Klaus, and Klaus had to develop his backing at the regional level. Although Klaus had been the very definition of centralism while in office, it is the regional level of the ODS which saved him from complete political death at the hands of his enemies at the party's centre.

After the financial affair was out in the open at the end of November, the sides were clearly drawn between Klaus on the one hand and his opponents within the ODS leadership on the other. Those against Klaus within the ODS never intended to form their own party; they wanted to oust Klaus and reform a post-Klaus ODS.

Both sides looked forward to the extraordinary ODS conference in the Central Bohemian town of Podebrady on 14 December 1997, which would decide the leadership of the party and determine the future of what could be called East-Central Europe's most successful party in the transition era. The delegates for that conference would come from all across the Republic, so all sides immediately set out to tally their support at the regional level.

Inside against

The forces arrayed against Klaus were to be found mostly in the centre and at the top of the party elite. The ODS parliamentary caucus, for example, took an early position against him.(133) Klaus was supposedly keeping a list of which representatives supported him and which did not,(134) but it was clear to everyone who the anti-Klaus ringleaders were. His primary rivals were leaders in the ODS elite: Pilip, Ruml and Vodicka. Former Education Minister and then Finance Minister Ivan Pilip had been the Chairman of the separate Christian Democratic Party (KDS) which only merged fully with ODS after the 1992 elections, and Pilip had been a Deputy Chairman of the ODS in December 1996. Jan Ruml, a former dissident, resigned his position as interior minister earlier in the year. A member of the Central ODS Executive Committee, Jindrich Vodicka was labour minister in the 1992-96 government, continued in that position after the 1996 elections and was, for a brief period, interior minister after Ruml resigned.(135)

Other party heavyweights lined up against Klaus at the Podebrady conference itself. Outgoing Minister of Health and Deputy Chairman of ODS Jan Strasky gave his support to Ruml.(136) Former Speaker of Parliament for ODS Milan Uhde strongly attacked Klaus at that conference.(137) Members of the ODS Parliamentary Caucus such as Jan Cerny complained that they were kept in the dark about their own government's policy too often.(138) The "grey eminence" and suspected mastermind behind Klaus's downfall, former Foreign Minister Josef Zieleniec, was not invited to the Podebrady conference even as a guest although he was a co-founder of the ODS.(139) Thus, most of Klaus's principle rivals came from within the upper echelons of the party.

Outside for

Below the highest echelons of the ODS, it is true to say that the regional situation in early December was initially rather fluid and chaotic. Early on in the crisis, the ODS split was causing friction within regional party organisations and dividing local ODS associations against each other. An example of the confusion was the West Bohemian regional ODS association where the local party associations in three towns of this region adopted three completely different positions on Klaus in the recent political upheaval. While the Karlovy Vary ODS Association was firmly behind Klaus, the Cheb Association supported Klaus's rivals within the party. At the same time, the ODS Association in Plzen remained on the fence, offering only very limited criticism of Klaus though accepting that some new faces at the top of the party might be necessary.(140) In other parts of the country, whole regional organisations took a careful and politically pragmatic line in the earliest days. The North Moravian ODS Association on 29 December 1997, for example, declared that it needed more information about the financial scandal before it could decide who to support.(141)

Soon, however, the regional associations coalesced around Klaus. This was predicted in some quarters of the ODS even before Klaus's fall,(142) and the first open expressions of support for the embattled leader came even before Klaus folded his government. On 29 November, the North Bohemian Regional ODS Association, called on Klaus to simply replace the resigning Christian Democratic ministers in his government with ODS men no matter the consequences for democratic standards. The Central Bohemian ODS Association also chimed in on the same day in favour of Klaus, and both organisations strongly criticised Klaus's rivals in the party who had called for Klaus's resignation, when the party chief was abroad.(143)

Early support for Klaus often approached the radical not only in the above mentioned vote from North Bohemia, which clearly took a page from the Czechoslovak Communist putsch of 1948, but also in the street protests in Prague at which hundreds expressed their support for Klaus and bitterly denounced his ODS rivals. The Prague Regional ODS Leader and Mayor Jan Koukal also took part in those demonstrations and expressed the support of his region for Klaus.(144) Of course, one must remember that these protests reflected only one side of the intra-party conflict and not the Czech public in general, 75% of which welcomed Klaus's demise at the time.(145)

As December 1997 progressed, more voices were heard from the regional level of the party, and it became ever more clear that Klaus was going to win the Podebrady vote. He may have been ousted by an attack from within the top party elite, but his complete fall was prevented by those at the regional and local levels of the party. By the end of the first week of December, the majority of regional and local ODS organisations had made their decision: Klaus would return as ODS leader.(146)

As the clear choice of the regional ODS organs, Klaus was re-elected to lead the party on 14 December, beating his rival Jan Ruml 227 votes to 72. Strangely, Miroslav Macek, whose September critique had started the wheels of political intrigue turning more rapidly, was the only person in the leadership to remain loyal to Klaus and keep his position. All other top party posts were filled by regional ODS leaders such as Libuse Benesova, the former mayor of the Central Bohemian town of Benesov, and Miroslav Benes, the mayor of Ceske Budejovice, who both became deputy chairpersons of ODS at the mid-December conference.(147)

Even though he had consistently rejected his participation in the next government (148) and even though he had been one of the major stumbling blocks in the long regional devolution process, Vaclav Klaus was saved by the regions.

1998: Continued crisis

After the government collapse at the end of 1997, President Havel asked KDU-CSL Chairman Josef Lux to suggest potential leaders who could form a new government. Of the three names on Lux's list, Havel chose the Governor of the Czech National bank Josef Tosovsky.

On 2 January 1998, Havel officially named Tosovsky's 17-member cabinet. Tosovsky had asked the three former coalition leaders, Josef Lux (KDU-CSL), Jiri Skalicky (ODA) and Vaclav Klaus (ODS), to submit their proposals for the new cabinet. Lux and Skalicky had given their suggestions, but Klaus had refused. Regardless of Klaus's intentions to move the ODS into opposition, Tosovsky offered four ministerial posts to ODS members. Those four soon left the ODS to join Jan Ruml's splinter party, the Freedom Union. The final cabinet included nine non-party members (two of which had left the ODA shortly after being named to the government), five from the Freedom Union US and three from KDU-CSL.(149)

To give this interim government without popular mandate a limited life span, the confidence vote in Parliament for Tosovsky's proposed cabinet was intentionally linked to the question of a new law on the sale of state property. If deputies did not settle the question of privatisation of state lands within three months, Parliament could be dissolved. In the end, however, such an arrangement was not necessary, as the Social Democrats forced through a constitutional amendment to shorten the Lower House's active term. With Havel's blessing, Tosovsky's government passed a confidence vote on 28 January, but it was fated to last six months.(150) Although Communists, Republicans and most of the ODS voted against him, Tosovsky had enough support from the ODA, KDU-CSL, Freedom Union and Social Democrats, who were anxious to see early elections.

From the very beginning, Tosovsky's cabinet was seen as caretaker government whose intention was to lay the groundwork for the next government, but it still wielded important power. It could take steps which were not so ideologically coloured and make headway on such issues as Roma rights and access to information. It could also implement regulations and decrees without the approval of Parliament, such as increases in energy prices and rents.(151) Tosovsky's government also took the final decision to approve the country's entry into NATO and drove it through Parliament before the mid-year general election.

But Tosovsky's cabinet was only a temporary solution, and the country was in full pre-election mode for the next five months.

Havel re-elected

Another important vote took place in the first month of 1998: the presidential election by Parliament. Vaclav Havel was re-elected during the first-ever joint session of both houses. In contrast to the 1993 presidential election, in which Havel was elected in the first round, in 1998, Havel scraped through by a hairsbreadth margin of one vote in the second round of voting. There were two other candidates up for election, Communist Stanislav Fischer and Republican Miroslav Sladek, who both dropped out after the first round. Havel's re-election was not without controversy.

The presidential vote was, in fact, conducted in the absence of one MP and candidate for the presidency: Republican Party Chairman Miroslav Sladek. Sladek had been stripped of his parliamentary immunity and had been put into police custody on charges of inciting racial and national hatred in relation to allegedly anti-German comments he made during Chancellor Helmut Kohl's visit to Prague in January 1997 for the signing of the Czech-German declaration.(152) Sladek had been contemptuously avoiding the courts for months, but the police finally caught up with him on 6 January.

The election of the President took place on 20 January, and on 23 January, Sladek was acquitted of the charges against him. He and several other SPR-RSC delegates later lodged a complaint with the Czech Constitutional Court, claiming Havel's re-election was unconstitutional, since he was elected by a margin of one vote while one MP was in prison on charges he was later acquitted of. In light of the popularity of the President and the infamy of the jailed MP, however, the Court rejected the complaints, claiming the case fell outside of its jurisdiction. This struck many as odd, because the election of the President is clearly governed by specific articles of the Czech Constitution and the Constitutional Court is identified as the judicial organ responsible for defending the Constitution. Paradoxically, in their attempt to protect democracy from the radical fascist Sladek, Havel and the Czech establishment actually succeeded in subverting democracy and giving Sladek more authority and legitimacy than he had before.

As if to add a touch of farce to these worrying circumstances, at one point during the presidential election proceedings, President Havel's wife, Dagmar, showed her discontent with spokesman of the Republican Parliamentary Caucus Jan Vik, who declared that the President ought to be ashamed of himself because of the method of his re-election.(153) With Sladek was a national hate-figure, however, many Czech citizens were not bothered by the suspicion surrounding the legitimacy of Havel's one-vote victory.

In the same month as the flawed presidential vote, the Havels made another apparent blunder when they launched a lawsuit on account of a satirical billboard advertisement which made allusions to the presidential couple.(154) The Havels' lawsuit did not find much support among the Czech public, and even less so later in the year when the presidential couple was awarded five million Czech crowns in the suit. To the public, it seemed that the Havels could not take a harmless joke.

The whistling incident and the lawsuit damaged Havel's popularity ratings, and Dagmar continued to be a leading cause of the problem. With statements calling for a formal position and title of a "First Lady," Dagmar was seen as haughty, vain and a bad influence on Vaclav.

In mid-February, for the first time in the country's history, President Havel dropped from first place as the country's most trusted politician and came out behind Josef Tosovsky, and popular CSSD MPs Petra Buzkova and Stanislav Gross. At 60%, Havel's approval rating was the lowest it had been in five years.(155)

The January re-election was just the beginning of Havel's problems, however, as it represented not only a compromise of Havel's democratic principles but also a missed political opportunity: he passed up his best chance to respectfully leave the political scene and give his country a hand-picked successor. In January 1998, Klaus was shaken by financial scandal and party upheaval and was in no position to contest the presidency. This opened a brief window of opportunity for Havel to strike and confirm his political direction for the country with a lesser-known, but like-minded successor. The Havelian trend in society missed its chance. The reasons are several.

First, the vanity of a leader and the self-preservation instincts of his advisors, who do not want to threaten their own privileged positions, will always keep a person in office longer than is probably best for the policies they promote. Second, despite the warnings of many commentators in the Czech press, Havel and his advisors probably did not realise just how golden their opportunity was. Everyone thought, and opinion polls at the time seemed to confirm, that Klaus was on his way out. Few realised that winter 97/98 was just a temporary setback for Klaus. Third, since Havel was not nearly as ill at the time as he would become in just a few months, the need for change was not seen as so urgent.

In any case, the Czech political establishment failed to strike while the iron was hot, and their inaction opened the way for the "opposition agreement" between Klaus's ODS and the Social Democrats after the June elections. That deal struck between rival parties has perpetuated the Klaus era.

Splinter still focused on the core

The Freedom Union originally started as an ODS splinter group around Jan Ruml which was designed to take control of the ODS by ousting Klaus. When, after the Podebrady conference of mid-December 1997, that intention was thwarted, the splinter group had to re-evaluate its options. But since the very beginning--since Jan Ruml's and Ivan Pilip's calls for Klaus's resignation back in November 1997 through its establishment as an official party, the Freedom Union, on 17 January 1998, and up to today--this group has maintained an obsession with Vaclav Klaus.

With Jan Ruml as chairman, the Freedom Union professed to offer a new style of public politics and tried to distinguish itself from the ODS, especially in areas of party financing and in communication with the press. But it defined itself solely around the negation of Klaus.(156) Some commentators were suspect of the new party and saw it as nothing more than opportunism of ODS members who had kept silent about ODS financial scandals until words started getting out. They were seen as jumping ship only after the ODS fell in opinion polls and water started rising around the ankles of the ruling coalition.(157)

Right from their party's inception, Freedom Union members were throwing around the figure of 10% as the proportion of seats their party would get in the June elections. By mid-February, opinion polls were already corresponding to this figure, and some findings were showing Freedom Union support surpassing the ODS.(158)

This was only temporary, however: Klaus was about to make a spectacular comeback.

Economic woes amplified

In February, a leaked document, supposedly part of an official estimate of economic development produced for the European Commission, indicated a maximum of 1% GDP growth in the Czech Republic until the year 2000. The document predicted 0.8% economic growth for 1998.(159) It was not a good sign: the Czech Republic was lagging behind all of the transformation countries in annual GDP growth.

The Czech National Bank had announced a new monetary policy in early January in which it oriented itself almost exclusively toward reducing "pure inflation," that is inflation not influenced by changes in regulated prices and indirect taxes. But after the unfavourable inflation figures of January and February, both the Ministry of Finance and the Czech Statistical Office ruled out any possibility of keeping inflation below 10%.(160) Later in the year, inflation estimates would not be so grim, but, at the time, predictions of minimal growth combined with continued high inflation sent a shockwave through the business community.

In June, figures were released showing that GDP had dropped in the first quarter of 1998 by 0.9% in comparison to the same period the previous year, and average wages had dropped by 2.1%. The Czech economy was collapsing.(161)

By July 1998, unemployment had surpassed 6% for first time since 1989. This figure, however, hid wide regional differences: while in the country's capital unemployment ranged between 0.8 to 1.5%, statistics in North Bohemian towns such as Most, where unemployment reached 14.5%, Louny (12.8%) and Chomutov (12.7%) told a much different story. Almost 60% of those unemployed were women and about a third were under the age of 25.(162) Over the next few months, records continued to be broken as the unemployment rate continued to rise.

Apple wars, pork wars

Just as the Czech Republic was getting ready to present its "National Programme for the Preparation of the Czech Republic for Membership of the European Union" to Brussels, the country's first serious economic dispute with the EU erupted in the form of what was eventually dubbed the "Apple War." In March 1998, the EU eliminated its preferential tariffs on imports of Czech pork, poultry and fruit juice in response to the Czech Republic's January decision to place quotas on apple imports from EU countries.

The feeling in the Czech Republic among both citizens and politicians was one of an uneven balance in the damages caused by the imposed quotas. The Czech measures were estimated to cost the EU 5.4 million ECU while the Czech Republic suffered 23.5 million ECU in losses due to the EU measures.(163) In a characteristic bout of anti-EU rhetoric which played well to the popular mood at the time, Vaclav Klaus urged Czech farmers to "not back down and keep fighting."(164)

Similar disputes over EU subsidies of agricultural goods exported to the Czech Republic, especially pork meat, erupted again in the autumn. The so-called "Pork War" escalated into several weeks of farmers' protests in November and December, culminating in a series of roadblocks across the country. Protests had been building ever since pork prices started drastically falling following the summer months.

Although some experts identified the problem as one of an increasingly high number of pigs and pig farms in the Czech Republic, rather than EU subsidies, the Czech government responded to farmers' protests with a decision to cancel preferential tariffs on imported pork, increasing duty from 15 to 40.9%. It eventually backed down from this threat when, following Minister of Agriculture Jan Fencl's lobbying in Bonn, Paris and Brussels, the EU agreed to lower its subsidies on pork exported to the accession countries by half.(165)

Nationalism: the good, the bad and the ugly

The sad economic news in early 1998 was countered by national pride in a Czech sporting victory. The Czech national hockey team took the Gold Medal at the winter Olympics in Nagano, Japan, and the country erupted in ecstasy at the first good news the country had seen in a while. Tens of thousands of people gathered in the wee morning hours in Prague's Old Town Square to watch the match against Russia on a large TV screen. Afterward, they flooded the surrounding streets and nearby Wenceslas Square, waving flags and shouting slogans such as "Hasek na Hrad," (Hasek [the team's goalie] for President) "Ted nas vi svet" (The world knows about us now).(166)

The victory brought an outpouring of nationalism which was later to be often cited with scorn by the intellectual class. Some even pessimistically saw it as the sole example of Czech civil society. Comments along the lines of "all we are capable of rallying around is a hockey victory" were to creep into the public statements of many politicians, including President Havel, for a long time to come.(167)

But the rather innocent celebrations of Olympic gold were the pleasant side of nationalism that month. February witnessed much more shocking events driven by nationalistic sentiments. In the East Bohemian town of Vrchlabi, a twenty-six-year-old Romani woman became the victim of yet another racially motivated murder.

A week later, a Romani family of three received exile in Britain.(168) The family were the first in the wave of Czech Roma who arrived in Britain in October 1997 to be granted political asylum. In October 1997, Canada had reinstated visa requirements for Czech citizens and large numbers of Czech Roma had begun emigrating to Great Britain instead.(169) 563 Czech Roma emigrants had been returned to the Czech Republic by the British government between October 1997 and February 1998. In the years between 1989 and 1997, Britain had granted asylum to approximately 10 Czech Roma families.(170)

Unconfirmed suspicions

In March, Czech Television exposed an alleged financing scandal within the Social Democratic Party. In what would later be dubbed the "Bamberg Affair," CSSD leader Milos Zeman had supposedly promised key governmental positions, if the CSSD won the 1996 election, to a group of Czech-Swiss entrepreneurs in exchange for favourable long-term, low-interest loans. A group of Swiss entrepreneurs allegedly met with Zeman and his deputy party chairman Karel Machovec in the German town of Bamberg at least three times in 1995. Machovec originally confirmed the allegations of promised government posts, but later denied his claim and was eventually struck from the candidate lists for the June elections for his role in the affair Zeman asked the State Secret Service (BIS) to investigate the affair.(171)

Following on the heels of ludicrous accusations made by Chairman of the CSSD caucus Stanislav Gross that the entire ODS split and the rise of the Freedom Union was a staged sham, the "Bamberg Affair" was just as ludicrously presented as a Freedom Union-rigged conspiracy. Zeman accused Freedom Union Party Chairman Jan Ruml of falsifying documents during his time as Minister of Interior in order to discredit the Social Democrats.(172)

Like the financing scandals surrounding the ODS back in November 1997, the "Bamberg Affair" turned into a murky swamp of dubious documents, political accusations and counter-accusations. There was a lot of mud being thrown, but little seemed to stick.

In the ODS's case, an audit conducted by the firm Deloitte and Touche in May 1998 did find inconsistencies and legal transgressions in ODS accounting and financing. The Deloitte and Touche audit found evidence of previous false audits, false reports presented to Parliament, incomplete and inaccurate records of sponsors' gifts and identities, tax fraud and an especially high degree of shady sponsorship practices at the ODS headquarters in Prague and Plzen. But, critically, the firm was unable to investigate the more important allegations surrounding privatisation, because the National Property Fund refused to hand over its documents. Most importantly, the existence of a foreign bank account, which former Foreign Minister Josef Zieleniec had pointed to, was not confirmed by the audit.(173)

A key problem in all these scandals was the continued existence of a weak, highly politicised media filled with young, inexperienced journalists, eager to be seen to be "breaking stories" but caring little for professional niceties such as the origin of documents and the reliability of sources. Journalists preferred to act as conduits for politically motivated "leaks" rather than engage in any kind of investigative reporting. (see chapter three)

Just as so many "scandals" before them, the "Bamberg Affair" and the ODS financing affair disappeared off the front pages and dissipated as new scandals arose. The citizen was left to only guess at the truth of the multitude of allegations.

NATO

In April, the ratification of the country's entry into NATO was approved in the Lower House of Parliament. This was followed by ratification in the Upper House and by the President in May. In the all-important Lower House the vote was 154 to 38, with only the Communists and the Republicans voting against and 6 CSSD MPs abstaining. Notably, the entire process passed with virtually no public debate on the issue and no public referendum such as the one which had been held in Hungary, in which 85% voted in favour of ratification.(174) In the time leading up to ratification, the CSSD had insisted on a referendum and presented a bill calling for a referendum to both Klaus's government and to Tosovsky's interim government. But the reaction of some deputies and the President to the mere suggestion of a plebiscite often verged on the hysterical: many dubbed the idea "insane," "irresponsible" and a "gamble" which would bring shame to the country in the eyes of NATO members. Many important members of the political establishment, including MPs Ivan Langer (ODS), Jiri Vlach (US) and Libor Kudlacek (ODA) as well as the President and his key advisor, Jiri Pehe, felt that the NATO question could not be left to the people because the people might vote incorrectly.(175) The adamant rejection of a referendum showed a fundamental mistrust on the part of Czech elites of the public's ability to decide on matters that affect their own lives.

Arguments claiming that the referendum could not be organised in time or that NATO entry was not an issue which affected the sovereignty of the state were weak and transparent. Public opinion polls confirmed that most citizens saw right through them and felt cheated that they would not get the opportunity to express themselves on the issue.(176)

To temper the CSSD's insistent calls for a referendum and save the country from "international embarrassment," a special session of Parliament was initiated, devoted solely to discussion of NATO ratification. At the special session, the Social Democrats capitulated on their demands for a popular vote on the issue, claiming that the need for a constitutional majority in both houses would pose insurmountable time constraints if entry was to be ratified by the end of 1998.(177) The media greeted the CSSD's retreat with exaggerated relief, printing headlines such as "The last Domestic Hurdle Has Fallen."(178)

Emergency, amnesty and embarrassment: A bad year for Havel

At the beginning of 1998, a group of medical specialists presented Parliament with a detailed report on the state of the President Havel's health. The bad news that many were expecting came in mid-April, although in a slightly different form than had been expected. Most had thought that following cancer surgery in 1996, lung problems would be at the root of health difficulties for the head of state; instead, in mid-April 1998, Havel found himself undergoing emergency surgery for a perforated large intestine in Innsbruck, Austria where he had been vacationing with his wife.

After doctors removed 35 centimetres of his large intestine, Havel seemed to be recovering smoothly, but, a few days later, he encountered post-operation complications and had to be put on respirator because of his chronic lung problems, and he eventually underwent a tracheotomy.(179)

After returning home, Havel was to undergo several minor operations stemming from the intestinal problem, but this did not keep him from the political limelight.

The month of May saw yet another questionable action on the part of the presidential office. Two Romani brothers, Jan and Josef Tancos, attacked Republican Party leader Miroslav Sladek during a pre-election rally in the North Bohemian town of Novy Bor. The local police investigator charged the brothers with disorderly conduct and "violence against another group of inhabitants with a racial subtext." The brothers claimed to have been defending the honour of President Havel and his wife against the impolite comments of Sladek. Only hours after the charge was filed, however, before the details of the case were clear and on a day that he underwent minor surgery, President Havel, in a swift and unprecedented move, granted a presidential pardon to the two accused brothers.(180)

Although some witnesses of the Novy Bor meeting denied that Sladek had made insulting comments about Havel, the brothers' effort was commended not only by the President and his wife but by several high-profile politicians, who spoke out enthusiastically and publicly in favour of the brothers' physical assault on Sladek. The President's Press Secretary Ladislav Spacek, for example, thanked the brothers for "the manner in which they showed that the values of this state matter to them." CSSD MP Petra Buzkova claimed that "many times in Parliament," she has had "the urge to do what the two citizens in Novy Bor did." Future Culture Minister Pavel Dostal said that the slap "was given in good faith." Presidential Political Advisor Jiri Pehe declared it a case of "human honour and politeness" and claimed that Sladek's alleged insult of the presidential couple "damaged the basic principles of this state."(181) Once again, the Czech political establishment seemed to be helping Sladek in his radical right ambition to become a national martyr.

But public opinion appeared to be on Havel's side this time. After the incident, the polling agency Sofres-Factum found that 85% of the population agreed with Havel's pardon, although only 20% agreed with the haste with which the decision was made.(182) Sladek had become such a despised figure on the Czech political scene that he could be physically attacked in public, and no one would lift a finger to defend his rights. His days in politics were obviously numbered.

Just as Havel's year of disasters and low opinion ratings was slowly coming to a close, he became embroiled in yet another scandal, this time a diplomatic one. In October, he withdrew a state distinction that was to be awarded to the former mayor of Vienna Helmut Zilk on account of accusations that Zilk had co-operated with and been an agent of the Czechoslovak State Secret Service (StB) during the Communist era. As is normal with any accusations past on events in the Communist years, an embarrassing murkiness ensued.

No one seemed to know who exactly provided the castle with evidence of Zilk's co-operation. Possible sources were Senator and former Director of the Office for the Investigation of the Crimes of Communism Vaclav Benda and Sueddeutsche Zeitung's Prague correspondent Peter Brod, whom Havel accused of blackmailing his press secretary, Ivan Medek, in order to get Havel to announce the withdrawal. After various investigations and the formation of an Interior Ministry commission to assess the allegedly incriminating documents, no government office was able to unequivocally declare whether Zilk was or was not a former StB agent.(183)

Global Street Party

The action of the Tancos brothers was not the only well-known manifestation of public violence in May, however. On 16 May, a group of young environmentalists and anarchists organised an event in Prague's Wenceslas Square called "Global Street Party" to listen to music and protest against the evils of globalisation. Unfortunately, the event degenerated into disorder.

Event organisers and the Prague police had grossly underestimated the number of revellers and protesters who would come to the "happening." In such a large, unmanaged crowd, some demonstrators began smashing store fronts, including McDonalds, Kentucky Fried Chicken and the Czech Savings Bank. The Prague police responded with shocking brutality not seen since the student demonstrations against the Communist regime in November 1989.

In a later review of events, it emerged that police had prepared for only a few hundred revellers, not the 3000 who showed up on the day. The officers assigned to the event panicked and reacted violently, cordoning off one of the main streets off the square, trapping some of the protestors inside and beating them. There were also allegations of police brutality upon innocent bystanders and upon people already in police custody.(184)

Both the actions of individual rioters as well as some of the improper actions of the police were captured on video by Czech Television, largely thanks to the quick thinking and strong contacts of reporter Filip Cerny, and the horror-filled footage was played to the nation on the nightly news. Sadly, the Czech media in general emphasised only one side of the story and focused on the protesters, predominantly portraying them as "hooligans" and painting gory scenes of mass "destruction and looting" by "utterly doped-up" participants who had to be dragged off to detox.(185)

But the violent police response did receive attention from human rights organisations, even on the international level. The Czech Helsinki Committee and the Centre for the Documentation for Human Rights appealed to Interior Minister Cyril Svoboda to investigate allegations of the excessive use of force upon those in custody and requested that all criminal proceedings in which evidence against the accused person did not exist be halted.(186)

In July, however, the investigation conducted by the Ministry of the Interior declared that the police intervention was within the limits of the law.(187)

A ghetto by any other name

In May 1998, the mayor of the North Bohemian town of Usti nad Labem, Ladislav Hruska (ODS), announced plans to build a four-metre high wall separating a series of family homes from two apartment blocks of council housing predominantly occupied by Roma residents. Non-Roma residents had twice asked the mayor for protection from the Roma and complained of noise, untidiness and harassment. The estimated cost of the wall was 350,000 crowns (USD 11,000) and was to be funded by the city. According to Hruska, the wall would be separating "socially maladaptive" residents from "the permanent inhabitants" and could even bring the two groups closer together because "it will help provide peace and quiet".(188)

Local Romani groups and various international organisations expressed shock at what seemed to be the creation of a Romani ghetto. Several high profile Czech politicians, such as Jan Ruml (Freedom Union), Vladimir Mlynar (Freedom Union) and Jan Kasal (KDU-CSL) expressed their criticism, as well, but the ODS and KSCM deputies for the region agreed with the local mayor that the wall was a good idea.(189) The issue was discussed both domestically and internationally over the next few months with little resolution.

In September 1998, representatives of the European Commission responsible for Roma issues made a brief visit to Usti to have a look at the wall, but were criticised for not talking with either of the two groups directly.(190) By that time, the four-metre high wall had shrunk to a 1.8-metre high "fence" of ceramic tile and construction plans were set for spring 1999. Upon the arrival of the Commission representatives, the mayor informed the experts that Usti had other problems which needed solving and that the wall had become an "inflated bubble." Residents of the family homes presented the group with a videocassette as proof of the recent mess the local Roma had caused in the streets.(191)

In a related project, municipal representatives in the city of Plzen debated the establishment of a fence-enclosed complex of residential "cells" on the outskirts of the city. The units would allegedly house city residents who don't pay rent, destroy their surroundings and bother neighbours with excessive noise--all popular Czech euphemisms for Roma.(192)

The June 1998 elections: The campaign

There was much speculation and uncertainty in the time leading up to the June elections; the political situation in the Czech Republic could be best described as fluid, even volatile. Opinion polls showed both major shifts in voter preferences and a large number of undecided voters.

Only the Communist Party's base of support remained stable. The Freedom Union's promising start became mired in the party's inability to distinguish itself from its parent party, the ODS, and, in the spring, the Freedom Union began falling behind in the polls. The Pensioner Party (DZJ) rose in popularity and seemed to be about to break through the 5% threshold and get into Parliament for the first time ever. The Civic Democratic Alliance (ODA), a party whose representatives had been in every Czech government thus far, simply disappeared off the pollsters' charts. The CSSD was apparently going to win the most votes, but no coalition partners were readily identifiable in any realistic post-election situation. Slowly but steadily, voters were returning to the ODS, but the opinion polls varied wildly throughout the campaign.

Many voters found themselves at a loss when faced with having to make a choice from a handful of political parties with which they could not identify. Often, a frustrating process of elimination ensued: they felt that they could not vote for the ODS again because Klaus had hurt the economy and helped the crooks. They thought about voting for Freedom Union, but decided against it because they saw it leader Jan Ruml as part of the ODS leadership that was discredited along with Klaus and considered him to be too much driven by his personal conflicts with Klaus and Zeman. Many voters felt that Lux's Christian Democrats were too close to the Catholic Church, and that the Pensioner Party (DZJ) only represented old people. The Communists had their firm base of support, but the party was not generally considered mainstream.

Some of these voters then thought about voting for CSSD, but declared that they could never do it as long as Zeman was in charge. If the party's young charismatic and popular MP Petra Buzkova had stood at the helm, some former ODS voters may have perhaps considered swinging over to CSSD. The CSSD obviously realised this as they used her face and the face of the popular MP Stanislav Gross along with Zeman's on the national campaign poster. Interestingly, these two popular, high-profile figures in the party's election campaign were passed up for cabinet posts when CSSD formed the next government.

While such frustration and voter apathy is typical of any democracy in the 1990s, the lead up to the June election demonstrated something slightly more in the young Czech democracy: extreme disappointment. So many people had hoped for so much after 1989, and almost ten years later, it seemed that, as far as the economy, state bureaucracy, corruption and decency were concerned, not much had changed. In 1998, people expected very little from the elections. They didn't expect the economic situation to improve. They didn't expect that EU entry would dispel the current fog. Most disturbing of all, as they went to the polls, voters did not expect elected officials and public services to be accountable to the people.

Without pressure for accountability, the politicians were left to their own game and accordingly made a concerted effort to artificially polarise the pre-election debate into ideological camps that had become meaningless for the vast majority. The two main Czech political parties--Vaclav Klaus's "right-wing" Civic Democratic Party and Milos Zeman's "centre-left" Social Democrats both ran a highly confrontational election campaign. Zeman accused Klaus and his party of conducting a "scorched-earth economic policy" in the Czech Republic over the past few years. For its part, the ODS played on the false dichotomy of "Klaus or Communism" in its campaign posters

Usually, a former government tries to stand on its record of achievement, but for Klaus this was obviously a problem due to his government's emphasis on the economic sphere and its marginal performance. Trying to defend 1% growth will not get a politician very far. Hence, Klaus tried to take credit for the Velvet Revolution as a whole and with the help of billboards sporting the foreboding and forever symbolic dates of "1948 - 1968 -1998," he tried to paint Zeman as a flaming red "Bolshevik" who would revert the country back into the days of the Communist Normaliser Gustav Husak.

The media usually played along with the simplified bipolar game, warning of outrageous, and utterly improbable, alliances, namely between the CSSD and the Republicans and/or Communists. Never mind that many prominent Social Democrats had consistently called for the banning of the Republican Party and that a deal between either of the two camps would mean being cast out of the President's good books.

Results of Parliamentary Elections to
the Lower House, 19 and 20 June 1998

Party

% of Votes

Seats in Parliament
(200 total)

Social Democrats (CSSD)

32.31

74

Civic Democratic Party (ODS)

27.74

63

Communists (KSCM)

11.03

24

Christian Democrats (KDU-CSL)

9.00

20

Freedom Union

8.60

19

Republican Party (SPR-RSC)

3.90

-

Pensioner Party (DZJ)

3.06

-

74.03% of eligible voters turned out to vote, 2.4 % less than in the 1996 elections. [source: Czech Ministry of the Interior]

Aftermath

Despite the turbulent campaign, the June 1998 elections simplified the political map greatly by placing only five parties in Parliament, rather than the oft-expected seven. Yet, following the elections, a stalemate situation arose not unlike the stalemate after the 1996 elections. This time, Zeman's CSSD had won, but Klaus's ODS was not far behind. Neither party could rule alone, however.

Several possible coalitions were debated in the weeks that followed, and, in the desperate shuffling of alliances which arose in the scramble to form some kind of ruling coalition, even President Havel made a surprising, yet short-lived, concession. Havel openly considered breaking the Communists' eight-year political isolation by stating that he might meet with them at Prague Castle to discuss potential coalition governments.(193) But that was only ever a fleeting prospect, because the Communists were still considered off-limits by the other four parties.

Thus, everything hinged on the two smallest parties, Lux's Christian Democrats and Ruml's Freedom Union, which had each received about 9% of the vote. More specifically, matters were dependent on Ruml, since Lux had already declared his party willing to co-operate with either big party.

Anxious to outflank the ODS and have itself declared the only true party of the political right, the Freedom Union defined itself as not only anti-Communist but specifically anti-Social Democrat. This was particularly the case with the party's chairman, Jan Ruml, himself. Ruml had a host of personal grudges against various Social Democrats from his days as Interior Minister, and these helped to shape his, and his party's attitude toward the CSSD. Ruml's Freedom Union was not exactly united on the strategy, but as long as Ruml was in charge, the party's official statements had always ruled out official co-operation with the Social Democrats.

Thus, in order for the Freedom Union to agree to enter into a majority government with CSSD and KDU-CSL, Ruml would have had to make personal compromises and redefine what he saw as the mission of his party, namely, keeping the Social Democrats out of power. He perhaps could have announced the Freedom Union was co-operating with CSSD and KDU-CSL in order to prevent the country shifting too far left under CSSD alone. This approach was not chosen, however.

Zeman did offer rather generous concessions to sweeten Ruml's attitude toward coalition. These included four ministerial positions out of 16 for the Freedom Union in a government lead not by Zeman but by Lux. Zeman's offer also promised veto rights for all coalition parties on critical legislation.(194) Even President Havel encouraged his old dissident friend Ruml to compromise. But nothing worked: Ruml would not budge.

Jan Ruml refused an alliance with Zeman, preferring to hope for a coalition with his other long-time enemy, Vaclav Klaus--but only under the rather unrealistic ultimatum that Klaus "alter his behaviour."(195) Unwilling to compromise, the Freedom Union chairman decided to lead his party to go into lonely opposition.

Several other coalition variations were discussed, such as a CSSD-KDU-CSL minority government with the silent approval of the Communists or some form of right coalition between ODS, KDU-CSL and US, but none came to fruition.

The Opposition Agreement

What arose instead was something dubbed the "Opposition Agreement" between ODS and CSSD. It imposed various mutual conditions on the two parties, the basis of which was simple: the ODS would tolerate a CSSD minority government under certain conditions. In exchange for not supporting votes of no confidence, the ODS was promised chairmanship of both houses of Parliament, as well as leadership of essential parliamentary commissions involved in oversight, such as the one overseeing the State Secret Service. Each party is bound to consult the other on any foreign or domestic policy issue before debate in Parliament if the other side so requests, and both parties are forbidden to enter into coalitions with anyone else.(196)

Voters of both parties could interpret the Opposition Agreement as a betrayal. The electorate had clearly expressed a desire for change, but they had certainly not imagined it like this. Nor did the politicians, apparently. In the wake of the signed agreement, there were wide-spread accusations of its unconstitutionality and its undemocratic nature. Other parliamentary parties, worried that the Agreement's intention to install a first-past-the-post electoral system for the Lower House would eliminate all but the two largest parties, called on the President to abolish it. Havel, whose presidential powers were also specifically limited by the Opposition Agreement had his own team of experts examine it.(197)

A major point of the Opposition Agreement was the commitment to enact electoral reform within twelve months of the agreement's signing. With this the Social Democrats and the Civic Democratic Party opened a new chapter in the short political history of the Czech Republic. With control of more than two thirds of the seats in Parliament, the two parties had the opportunity to change the Czech Constitution. After forty years of a one-party system and a few years of a multi-party system, usher in the first-past-the-post electoral arrangement which was likely to cement a two-party system. For some, such a system promised the long sought after political stability they sought. But for a complex society undergoing rapid change, a bipolar system could also be stultifying.

Following the elections and the signing of the Opposition Agreement, the essential conflict between ODS and CSSD has had less to do with programmes and more to do with time. The ODS has been eager to implement constitutional change as soon as possible, with an eye to using a first-past-the-post system to siphon off votes from Ruml's Freedom Union and Lux's Christian Democrats--perhaps in a second round of voting in a two-round system--in order to regain power. At the same time, the CSSD has been trying to do everything it can to postpone the Constitutional changes so as to stay in power longer.

The changes will no doubt be tailor-made to fit the two parties, but the new system may not be as horrendous and undemocratic as its detractors make out. After all, expecting power to flip-flop between them for decades to come, both parties will seek to install checks and balances in the new political system that allow the opposition to have some voice and perhaps even some power. Negotiations on the matter continue and the final shape of the new political system remains to be seen.

The fall of the Republicans

Probably an even bigger surprise than the "Opposition Agreement" and, for the majority of the population, a slightly more pleasant one, was the fact that the radical right Republican Party (SPR-RSC) and the Pensioner Party (DZJ) failed to get into Parliament. In the run-up to the elections, these parties attempted to capitalise on voter frustration, and, throughout the campaign, it seemed that there had never been a better time for lesser-known parties to make their mark in Czech politics and to enter Parliament. Up until the very last day of polling, commentators and analysts were predicting about 7% for each.(198)

In the end, however, neither was able to clear the 5% threshold needed to make it into Parliament. The DZJ's loss was perhaps more understandable since the party targeted a rather select section of the population, though despite its electoral failure, the DZJ had played an important role in raising public concern about pensioners' issues. The DZJ did get politicians from other parties to focus on these issues with the real threat of stealing votes.

The more interesting case was that of the Republicans. In comparison with the 1996 elections, a significant number of swing voters had strayed away from Sladek's radical Republican camp. According to exit polls, in the 1998 elections, a few thousand of these went to the Civic Democratic Party (ODS) and over 100,000 went to the Social Democrats.(199)

These voters were still voting for change, as they had done in a more radical fashion in 1996, but this time they were less interested in ideology and immature rantings: they were seeking practical solutions to their everyday problems. Sladek's standard, simplistic proposals no longer seemed to provide these. As people realised the Czech-German Declaration actually had very little practical effect they became less scared of it and Sladek lost "the return of the Sudeten Germans" as a favourite target. Similarly, much of the white population grew tired of hearing about Roma issues, another favourite object of Sladek's bigotry, and did not consider it a pressing problem.

The one issue that past Republican voters and the rest of the Czech population did consider pressing, however, was the economy, and here Sladek and his party did not provide much in the way of solutions. The Republicans did make an effort to tone down their rhetoric and put on an innocent face during the election campaign by pushing their mild-mannered, more media-friendly front man Jan Vik to the fore. This proved fruitless, however: voters looked elsewhere.

But discontent in Czech society did not disappear with the diminished Republican support, rather it became somewhat deradicalised. That is not to say that a more radically oriented dissatisfaction does not still exist: parties with a more radically anti-establishment message--KSCM, DZJ and SPR-RSC--together still scored 18% of the vote in 1998, that is, near one in five Czech voters.

The Social Democratic government

In July, Zeman presented his cabinet of four deputy premiers and 15 ministers. The cabinet contained no women, and was composed of mostly older, low profile party members rather than some of the younger, more popular CSSD politicians. Petra Buzkova and Stanislav Gross, the two Social Democratic MPs who consistently rank in the top three of public opinion polls.(200)

Zeman's cabinet founded a new governmental authority for the protection of human rights and named Petr Uhl, a former journalist, political prisoner and Charter 77 signatory, as the Government's Commissioner for Human Rights. Uhl began tackling some of the problems of Roma rights, including the highly publicised controversy over the building of a memorial on the site of a former Roma concentration camp at Lety--which Uhl planned to fund by means of a public collection.(201)

During the election campaign, the Social Democrats had announced a major investigation into the shadier privatisation deals of the Klaus years, and despite the new government's reliance on ODS support, a "Clean Hands" programme was begun after the election. As yet, the results have been less than spectacular, the project having been somewhat mired in organisational details for the first months of its existence. The government's efforts were not helped by the early resignation of Jan Sula from the chairmanship of the Clean Hands Committee for the Defence of Economic Interests. Sula resigned from the investigative body due to violent threats against him and his family: clearly, some people do not want mass privatisation re-examined, and it remains to be seen how far the Social Democratic government will proceed with the "Clean Hands" programme.

The new government also sought to take a slightly new direction in foreign policy, especially in the area of regional co-operation. At the CEFTA (Central European Free Trade Agreement) summit of the premiers of the seven member countries in Prague in mid-September, Premier Zeman stressed the new government's intentions to renew co-operation among the Visegrad countries, something that had increasingly deteriorated throughout the years of Klaus's rule. Concrete manifestations of this co-operation proved to be harder to identify, however, and the summit showed that quotas and other protectionist measures, especially in the area of agriculture, between individual CEFTA members still posed a very real obstacle to a completely free market.

At that summit Zeman and then Slovak Premier Vladimir Meciar also agreed to form a commission to oversee outstanding issues related to the division of former federal property.(202)

At the end of October, a rather unnecessary diplomatic row broke out over the Prague-based, US government sponsored Radio Free Europe/Radio Liberty (RFE/RL)and its plans to broadcast to Iran and Iraq. After months of hold-ups in which the new government suspended the interim cabinet's approval while it allegedly weighed the security issues involved, RFE/RL began its services to the two countries. Some friction arose over the issue between the US and the Czech Republic as several US congressmen and senators wrote a letter to US Secretary of State Madeline Albright complaining that Czech government paying more attention to Iranian terrorists than to requests of US administration government. Tensions increased when a few days before his official state visit to the US in September, the chairman of the House of Representatives' Foreign Affairs Committee sent a letter to President Havel, who had been instrumental in transferring RFE/RL's headquarters from Munich to Prague, asking him to put pressure on the new government to change their stance. After broadcasting finally began, Iran recalled its ambassador form Prague and announced plans to limit its diplomatic and economic ties with the Czech Republic.(203)

In domestic affairs, regionalisation within the Czech Republic was also an issue for the new government. At the end of October, the government submitted its plans for regional restructuring to the European Union for approval. In the plan, Zeman's cabinet vowed to amend the decision approved by Parliament in 1997 to divide the country into 14 autonomous regions by the year 2000. The new plan added confusion to chaos: eight larger regions would exist in parallel to the original 14 but, unlike the 14, these eight would satisfy EU requirements for structural funds, that is, each would have at least one million inhabitants a GDP of 75% of the EU average. The specifics of the regional divisions were murky, and the government was unable to present neither a budget nor an overall concept of the new regions to the public. In fact, for several years, the entire issue of regional restructuring had escaped public debate and hence excluded any input from the residents in the regions themselves.(204)

A major opponent of regional restructuring was Vaclav Klaus, who declared it to be "one of the biggest mystifications and false theses circulating the Czech Republic." He claimed that regional divisions should spring out of an internal need within the regions and not any hankering after a few marks in EU structural funds.(205)

A letter from Brussels

On 4 November, the European Commission released a damning report on the Czech republic's lack of preparedness for joining the European Union. The report touched upon all significant areas of social and civic life and called for quicker pace of reforms in most all of them including the justice system, the environment, industry, agriculture, human rights, state administration and internal markets.

In several key legislative areas the Commission noted no progress at all since its last assessment in June 1997. These areas included overall public administration reform, legislation regarding intellectual property rights, anti-trust legislation, justice reform and citizenship laws. The report called for large scale reform in all of these areas as well as of the financial sector. It noted the country's need for improved corporate governance, enterprise restructuring, greater transparency and effective anti-corruption measures. It also called for improvements in legislation regulating water and industrial pollution and a strengthening of agriculture institutions.

A significant portion of the Commission's report was devoted to the situation of Roma: the Commission saw no improvement in minority rights since its last report. The 1998 report mentioned the persistence of a negative image of Roma in the media and criticised the various efforts to isolate Roma within walled and fenced communities across the country (Usti and Plzen). In addition, the report criticised the country's National Programme for the Preparation of the Czech Republic for Membership of the European Union, which the interim government presented to the Commission in March. The Commission claimed the quality and level of detail of the institution building component varied greatly between chapters and was generally inadequate, as were the sections on the implementation of timetables and budgets.(206)

Overall, the November 1998 report identified the Czech Republic as one of the weakest members of the "First Wave" accession countries, lagging significantly behind both Poland and Hungary. But rather paradoxically, in the same month as the Commission released its report, the Czech Republic began formal accession negotiations with the EU.

November elections

In November, two sets of elections took place which both registered a surprisingly low turnout: one to fill one-third of the Senate seats and the other to occupy municipal councils in over 6000 of the country's electoral districts. Again, campaigning was strongly based on individual personalities and forced into inappropriate ideological categories.

The disturbing state of political campaigning was symbolically represented in the huge(20 metres by 10 metres), megalomaniacal billboard erected illegally by Klaus's ODS in Prague on the very spot where an largest statue of Stalin in the world had stood in the 1950s. Following in the line of other populist ODS slogans such as "Ne socialstickym experimentum," (No to socialist experiments) the billboard sported a massive colour portrait of the ODS leader, with a greying Zeman hovering in the background. The slogan on it read, "Myslime jinak" (We think differently), and many were apparently beginning to believe the ODS's words: in the elections, many voters thought differently and voted against them. In the key Senate seat of Prague 6, Prague Mayor and ODS bigwig Jan Koukal was defeated by Jan Ruml, now in the leadership of a new coalition.

The smaller parties had felt threatened by the possibility of a first-past-the-post system which the Opposition Agreement seemed to promise. As a response four smaller parties--ODA, DEU, US and KDU-CSL--formed a coalition in the run up to the November Senate and municipal elections. Some in this grouping simply wanted to pool their votes and prevent the two major parties from getting a constitutional majority in the Senate.(207) Others hoped the "Four-Coalition" would gradually transform into a new, larger political party to rival the big two. The coalition's stability was shaken at the end of September by the unexpected resignation of KDU-CSL chairman Josef Lux after he was diagnosed with leukaemia, but this did not hurt the "Four Coalition" in the November Senate elections.(208)

Indeed, the new "Four-Coalition" was the clear winner in the Senate elections, winning 13 of the 27 contested seats. The two largest parties, ODS and CSSD, both fared significantly worse, receiving nine and three seats respectively. The Communists also picked up two seats in the Senate.

It was widely thought that voters had punished both Opposition Agreement partners for their odd-couple arrangement; both the ODS and CSSD each lost three seats in the Upper House. Unfortunately for the "Four-Coalition," however, the two political giants, the ODS and CSSD, still managed to hold on to the three-fifths majority they needed to pass their planned electoral reform.(209)

The CSSD was the biggest loser in the November elections. Out of a total of 27 candidates, 12 dropped out in the first round of voting and an additional 12 failed in the second round.(210) In the aftermath of the disappointing CSSD results, Party Chairman Milos Zeman made some controversial remarks about his own party. He chastised CSSD members for not offering distinct enough personalities and simply relying on the "company name." Zeman declared that "heads must roll," and a "defecalization" of the party had to take place.(211)

Some of Zeman's criticism also focused on the party's inability to mobilise voters. This was manifest in the November 1998 elections chalking up the lowest voter turnout since 1990. The 42.4% turnout in the first round of voting collapsed to a mere 20.4 % in the second round. In some voting districts, it as low as 14%.(212) Most commentators attributed the low turnout to the public's low opinion of the Senate as an institution. Opinion polls showed that public confidence in the Senate had been decreasing throughout the year and was hovering between 11 and 15% at the time of the elections.(213)

A month after the elections, the Opposition Agreement was put to the test in the Upper Chamber as senators geared up to elect their chairman, a position that was supposed to be allotted to the ODS according to the Agreement. During the vote, there were indications that some Social Democrats violated the agreement by supporting the incumbent Petr Pithart and not the ODS candidate Libuse Benesova. A second round of voting was needed to confirm Benesova as the chairwoman of the Czech Senate.(214)

In the local elections of November 1998, the results were rather more mixed, independent candidates took the largest number of seats (13.17%) but only 1.46% of the total vote. Conversely, ODS won the largest portion of the vote (24.27%) but received only 9.15% of local mandates, about the same as the Communist Party, who received 13.58% of the popular vote. The KDU-CSL was the strongest party in terms of number of seats (11.40%), but their four-party coalition partner the Freedom Union only managed 1.12% of the seats and 5.50% of the vote. The Social Democrats increased their representation on municipal councils almost threefold but still received only 6.80% of the seats (17.54% of the vote).(215)

Just as in the Senate elections, voter turnout was low--slightly above 45%, which was 17% lower than the previous communal elections, four years earlier.(216) This meant that the national parties with disciplined supporters in the regions were the ones to bring in strong returns at the ballot box. Thanks to its loyal membership and well-developed political network in the regions, the ODS obtained the majority of seats in most of the country's larger cities and came out as a strong force in the majority of towns with a population of over 10,000.(217) Although lacking a clear program, ODS again managed to get its voters to the voting booths, showing that Klaus's pull and local party discipline was still strong even one year after the party and the chairman's fall.

In the capital, the ODS suffered some setbacks. The party lacked a majority and hence needed a coalition partner in order to push through its mayoral candidate Jan Kasl, who replaced Jan Koukal, leader of the ODS Prague's division, who resigned unexpectedly after his Senate defeat at the hands of arch-enemy Ruml. After coalition talks failed between ODS and US, who insisted on their own mayoral candidate, ODS agreed to duplicate its coalition with CSSD on a local level. A similar coalition was established in the city of Plzen and elsewhere in the country.(218)

Firm alliance, faltering society

Consultations and the silent coalition between Klaus's ODS and Zeman's CSSD continued on the national level as well. At the request of House Speaker Vaclav Klaus, Prime Minister Zeman, trade union leader Richard Falbr, and Czech National Bank Governor and former interim Prime Minister Josef Tosovsky met in December 1998 to discuss the continuing economic crisis. Not many practical solutions emerged from the meeting and the participants could not unanimously agree on either the causes of or the solutions to the economic crisis. Klaus, Zeman and Falbr agreed that the way out of the economic crisis was through a new domestic economic policy which would be less focused on lowering inflation and external imbalances and more geared toward financial stabilisation of the bank and business sectors. Tosovsky, however, saw the solution not in reprioritisation but in the creation of the right market conditions for long-tem economic growth.(219)

Despite their good intentions, the economy continued its collapse. GDP was in the negative numbers, and the trade deficit had reached record figures.(220) Unemployment reached 7.5% nation-wide and was as high as 15.6% in the hardest hit localities by the end of the year.(221)

In the spring of 1999, the Czech Republic had been without an elected majority government for nearly three years. Almost a decade after the Velvet Revolution which swept away Communism, the country can still not be said to be politically stable.

The political parties themselves are still in great flux. On the left, there is constant talk of a split in the ruling CSSD, both along generational and policy lines.(222) On the right, the plethora of parties that refuse to negotiate with each other destroys any possibility of cohesion.

More importantly, the very rules of the political game have yet to be agreed upon, as the "Opposition Agreement" plans rather sweeping constitutional changes and the new regional arrangement supposed to be in operation by 1 January 2000 has been neither costed nor funded. The country has achieved NATO membership, but no one is sure how much it will cost the country, whose economy is now in crisis. The political fallout of the expected 11% unemployment is unpredictable.

For the Czech Republic, see David M. Olson, "The Experience of the Czech Republic", pp. 150-196 in Karen Dawisha and Bruce Parrott eds., The Consolidation of Democracy in East-Central Europe, (Cambridge, 1997), p. 158; for Slovakia, see Wolchik, "Democratization and Political Participation in Slovakia", p. 217.

Wolchik, "Democratization and Political Participation in Slovakia", p. 212.

Abby Innes, "The Breakup of Czechoslovakia: The Impact of Party Development on the Separation of the State", East European Politics and Societes, Volume 11, No. 3, 1997, p. 415.

Civic Forum received 53.1% in the federal assembly's house of the people, which was based on proportional representation and 50.0% in the Federal Assembly's House of Nations, in which there were an equal number of Czech and Slovak representatives. In the election to the Czech national assembly, Civic Forum received 49.5% of the votes. Josef Tomes, Slovnik k politickym dejinam Ceskoslovenska 1918-1992 (Prague, 1994), p. 273; and Abby Innes, "The Breakup of Czechoslovakia: The Impact of Party Development on the Separation of the State", East European Politics and Society, Volume 11, No. 3, 1997 p. 396.

Katherine Terrell and Daniel Munich, "Evidence on the Implementation and Effectiveness of Active and Passive Labour Market Policies in the Czech Republic", pp. 179-226 in Lessons from Labour Market Policies in the Transition Countries (OECD, 1996), pp. 180 and 205.

Gaspar Fajth, "Family Support Policies in Central and Eastern Europe", paper presented at the National Academy of Sciences Task Force on Economies in Transition, Workshop on Institutional Change and Social Sector Reform, September, 1996.

Jirina Siklova, "Inhibition Factors of Feminism in the Czech Republic after the 1989 Revolution", pp. 33-43 in Marie Cermakova ed., Women, Work and Society, 1995, Working Paper 95:4 of the Institute of Sociology, Czech Academy of Sciences, p. 41.

Milada Anna Vachudova, "International Influences on the Czech Republic", draft manuscript for Alex Pravda and Jan Zielonka eds., The Impact of International Factors on Democratic Consolidation in Eastern Europe (Florence: European University Institute, forthcoming).

Vladimir Nachtigal, "The Czech Economy in the First Half of the 1990s: comparison with similar European economies", Prague Economic Papers, no. 1, 1998, p. 21 and Vintrova, "Convergence of Real Economy in Central and Eastern Countries on the European Union", p. 292.

Petr Pavlik, "Is the Czech Economy Ready for EU Accession?" paper delivered at a conference in Erlangen in fall 1997, published in Journal of Social Sciences, University of Ljubljana Press, Volume XIV-Number 26, 1998.

Andrew Stroehlein, Czechs and the Czech German Declaration: The Failure of a New Approach to History (Glasgow, 1998), The Glasgow Papers No. 1, 1998. More complete online version HERE.

Much of the information concerning Klaus's actual strategy comes from private discussions with officials from the Foreign Ministry and the EU delegation in Prague. For more on Czech foreign policy, see, for example, Milada Anna Vachudova "International Influences on the Czech Republic" draft manuscript for Alex Pravda and Jan Zielonka eds., The Impact of International Factors on Democratic Consolidation in Eastern Europe (Florence: European University Institute), forthcoming.

Chapter 1, paragraph 65 of the UNHCR Handbook on Procedures and Criteria for Determining Refugee Status under the 1951 Convention and the 1967 Protocol Relating to the Status of Refugees (Geneva, 1992).

In addition to the following, see foreign press review in Radio Prague, 2 December 1997.

The Economist, 6 December 1997.

The Times, 1 December 1997.

Radio Prague, 2 December 1997.

Radio Prague, 3 December 1997, Chairman of the ODS Caucus Jiri Honajzer resigned his function over this issue.

Radio Prague, 1 December 1997; Radio Prague 14 December 1997; Radio Prague 15 December 1997; Mlada fronta Dnes 11 June 1996 Priloha "Volby '96" and the Czech government web site at www.vlada.cz/.

Radio Prague, 14 December 1997.

Radio Prague, 15 December 1997; Mlada fronta Dnes, 15 December 1997; and Lidove noviny, 15 December 1997. Though Klaus did have the support of Payne and Ivan Kocarnik and of most of the Senators for ODS. Radio Prague, 15 December 1997 and Radio Prague, 3 December 1997.

See, for example, Jan Cerny's comments at the Podebrady conference in Radio Prague, 14 December 1997.

Radio Prague, 15 December 1997.

CTK (Czech News Agency) 1 December 1997.

SlovoOn-line, 29 December 1997.

See Vodicka's comments in Radio Prague, 1 December 1997 and Deputy Chairman of the South Moravian Regional Association of the ODS Zdenek Geist's in CTK 1 December 1997. Vodicka announced at the same time that he would support Klaus' opponent in the leadership struggle and that if Klaus won, it would probably lead to the break-up of ODS--which is what happened. Geist is a close associate of Pilip and who was one who called early for Klaus's resignation.

Politicians in Lidove noviny, 6 March 1998; Havel in Pravo, 10 March 1998; and 30 March 1998. Polemic on the issue between Andrew Stroehlein and Jiri Pehe in Britske listy, 20 October 1997, 20 March and 3 April 1998.

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I've been writing about violent conflict, post-conflict situations, authoritarian regimes, and post-authoritarian transitions, as well as the role of the media in all of these, for nearly two decades. These pages bring some of those articles together in one place, particularly texts that have disappeared when their original pages went offline for various reasons. I'll also post some new bits and pieces here once in a while.